Mercedes-Benz Group AG – Risk Profile
- As per GlobalData’s proprietary risk methodology, Mercedes-Benz Group AG’s overall risk score is 3.06, signifying moderate risk
- Country and operational risk pillars have boosted the overall risk profile of the company
- High leverage and low liquidity ratios compared to peers affected the financial risk pillar
Daimler AG, now rebranded as Mercedes-Benz Group AG (Mercedes-Benz), has a moderate risk profile based on our proprietary risk assessment of the vehicle manufacturing sector in the automotive industry. The country risk pillar strengthened the overall risk score for Mercedes-Benz. A strong brand position, substantial operational presence, and strong operational performance are its strengths, even as a decline in working capital could be causes for concern.
About the Company
Mercedes-Benz Group AG, formerly Daimler AG (Mercedes-Benz), headquartered in Stuttgart, Baden-Wurttemberg, Germany, develops, manufactures, and distributes premium and luxury cars and vans. It also provides financing, leasing, fleet management, insurance, and mobility services. The company has production facilities in North and South America, Europe, Asia, and Africa.
The company reported revenues of EUR133,893 million for the fiscal year ended December 2021 (FY2021), an increase of 9.9% over FY2020.
Risk Pillars
Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. The risk scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.
Mercedes-Benz’s overall risk scores aligns with the sector average, with country, industry, and operational risk pillars faring better than the sector average. Companies like Subaru, Hero Motor Corp, Porsche, and Geely are the leaders in the sector.
Country Risk:
The company derived a majority of its revenues from Europe, excluding Germany (25.25%), followed by the US (24.50%), Germany (16.37%), China (13.83%), and Asia, excluding China (12.05%). Presence in various countries insulates the company from the risk associated with economic and political factors of a specific region, resulting in a country risk of 4.31.
Industry Risk:
The company generates most of its revenues (83.27%) from the vehicle manufacturing sector and the remaining from the electrical components & equipment and diversified support services sectors. Strong revenue growth characterizes the vehicle manufacturing sector, but low-profit margins and higher cyclicity hinder the sectors, resulting in an average industry score of 3.43.
Operational Risk:
Mercedes-Benz has an operational risk score of 3.28, primarily driven by its scale and business positioning pillars. The company has a substantial brand value and is a global leader in premium cars and vans. It has a presence worldwide and is number one in the premium segment in Germany, South Korea, Japan, and key European markets. Substantial operational presence worldwide provides competitive advantages and growth opportunities to the company and allows it to secure local market know-how. The company’s strong operating performance increases investors’ confidence and provides a positive outlook for the future.
Financial Risk:
The company has a financial risk score of 2.02, below the sector average. High inventory days impacted the liquidity ratios. Compared to its peers, high debt to equity ratios also affected the company’s leverage ratios. A lower proportion of cash and cash equivalents of the total current assets could render the company to borrow short-term financing in the case of additional unforeseen indirect costs, increasing its interest liabilities.
About our Methodology:
GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData’s proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company’s risk and return potential based on its key operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.
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