BMW Pulls Ahead With Investors

The S-Class Mercedes has been the default choice for the global taste-and-wealth set for a very long time, probably since the demise of the Elwood Engel Continental. The 7-Series BMW, by contrast, has always been a slightly embarrassing purchase, the choice of the man cut out from the classy club by birth, ignorance, or a slightly unseemly insistence on driving dynamics. BMW is the striver’s brand, launched into the spotlight by a man who was sort of the Nadia Comaneci of sweaty social climbing. Mercedes is the real thing. Hasn’t it ever been thus?

German investors, on the other hand, seem to like the Roundel.

An article published by Bloomberg late last week seems to suggest that the bloom is off the Daimler-Benz rose, and a large part of that is due to the infamous Dr. Z:

BMW’s market capitalization has surged to 45 billion euros ($58.8 billion), versus 42.2 billion for Daimler. Subtract a reasonable price for Daimler’s truck business — the world’s biggest — and the value investors assign to Mercedes stands at about 25 billion euros.

“The market is saying that the prospects for Mercedes are much worse than for BMW,” said Hans-Peter Wodniok, an analyst with Fairesearch in Kronberg, Germany. “The market’s always right. In terms of innovation, BMW is the leader.”

“The market’s confidence in Daimler management is pretty much at rock bottom,” said Max Warburton, a Bernstein analyst in Singapore. “Investors have little or no confidence that current management will be able to do what is necessary to close the gap to BMW.”

One would think that the time to have lost confidence in Daimler management would have been a decade ago, when the product was iffy at best and even the mighty S-Class was often seen driving around with a dead COMAND screen and a droopy air suspension. Sometimes perception lags reality. Not to worry, though: investors may be bearish on the three-pointed star but there’s redemption ahead.

the potential of the Mercedes brand in China is “ overwhelming,” said Yale Zhang, managing director of consultancy Automotive Foresight in Shanghai. “Every consumer understands the value of Mercedes and the logo.

While the S-Class no doubt reigns supreme in China as elsewhere, the relatively lackluster star quality of the C-Class probably has customers there wondering if they really wouldn’t rather have a Buick.