Daimler Truck, the largest maker of truck and bus in the world, will be spun off from its parent company, the German carmaker Daimler said on Wednesday. Analysts view this move by the German company to make itself more appealing to investors in its efforts to focus more on development and manufacturing of its electric luxury car business. This move resulted in the stocks of the company rising by 9 per cent.
According to analysts, this decision of Daimler to spin off a part of its business is a follow up on similar moves by other German companies such as Siemens AG. There is a growing demand among investors to on company boards to break up large conglomerates with varied business interests.
Analysts said that this move also underscores the efforts of the company’s Mercedes-Benz luxury car brand to pose a strong challenge to the likes of the United States based electric car maker Tesla Inc, as well as luxury car makers Porsche, BMW and others and gain a greater share of the market for electric luxury cars.
“This pure play luxury car company is even more attractive to investors who seek a return in that area,” Chief Executive Ola Källenius said during a conference call. It is expected that the standalone Mercedes-Benz business will be viewed as a competitor for Tesla and hence will earn a higher valuation from investors over time, Källenius said.
“It’s about transformation and winning in electric (vehicles) and car software,” he said.
Daimler said that the final decision on the spinning off of the business will be taken at an extraordinary shareholders’ meeting which could be organized at the end of the third quarter. The company also said that the new business could be publicly listed on the Frankfurt stock exchange by the end of the current year.
The breaking up of the truck business of Daimler was a logical move because the business did not add any value to the share price of Daimler, said analysts.
“The outcome is extremely positive for all shareholders,” Bernstein analyst Arndt Ellinghorst wrote in a client note, adding there was “very little industrial and cultural logic for combining these two very different businesses”.
The in 2019, deliveries of about half a million trucks and buses to consumers globally was made by Daimler Truck with helped the business to generate revenues of 40.2 billion euros ($48.34 billion) from sale of trucks and 4.7 billion euros from sale of buses.
The traditional rivals of Daimler in the global truck market include Sweden’s AB Volvo, Volkswagen AG unit Traton and Paccar Inc. In order to compete with Tesla’s long-awaited Semi truck model, Daimler is rushing to develop and launch a fully-electric heavy-duty truck model.
Different approaches are being adopted at bringing down carbon emissions by commercial trucks and luxury cars and this was one of the reasons that prompted Daimler to separate the business, said Källenius and Daimler Trucks chief Martin Daum while talking to analysts.
“We have confidence in the financial and operational strength of our two vehicle divisions,” Källenius said.
(Adapted from Reuters.com)