Mercedes-Benz USA, a subsidiary of the German automaker giant Daimler AG, is best known for its lineup of luxury cars and SUVs. However, its recent advertising strategy shows that the company may be trying to compete with Ford and General Motors to capture the heart of a different demographic: blue-collar America.
Continue Reading Below
Utility vehicles are big business
Truck, SUV, and van sales are a big market in the U.S., smaller only than China. Through September, nearly 13 million light vehicles have been sold this year, 8 million of which were trucks, SUVs, and vans. Granted, most of those are not work vehicles. However, over 2 million pickups and over 300,000 commercial vans have been sold so far this year. Work van sales have gone up substantially in recent years, increasing nearly 10% in 2016 and expected to clear 400,000 again this year.
By contrast, car sales are down 10.5% in 2017. That trend has hurt Mercedes-Benz, too, with its car sales dipping 5.4%. That isn't too concerning, as auto sales are cyclical in nature, and the economy is still growing.
With an improving economy comes increased business spending. Mercedes-Benz sells a line of commercial and work vans, the Sprinter and Metris, geared toward the working class. It's a small segment overall -- over 34,000 units sold last year -- making up only 10% of Mercedes-Benz USA's 2016 sales and good for about the same of U.S. work-vehicle market share.
There is plenty of room for growth, though, with Ford's lineup of work vans gobbling up over half of the market. That may explain some of Mercedes-Benz's marketing shift in recent years.
Continue Reading Below
|Company||Market Share of Commercial and Work Vehicles (2016)|
|Ford (NYSE: F)||52%|
|General Motors (NYSE: GM)||23%|
|Fiat Chrysler (NYSE: FCAU)||11%|
|Daimler (NASDAQOTH: DDAIF)||9%|
|Nissan (NASDAQOTH: NSANY)||5%|
Mercedes-Benz for the working man
To nab some of the work van business, Mercedes-Benz has been running ads during sporting events, including during NFL Sunday Night Football games. But the German automaker hasn't been content with making jabs at its American rivals with TV spots. Back in 2011, the company bought the naming rights to the Superdome in New Orleans, home of the NFL's Saints. That 10-year deal was followed up in 2015 with the naming rights purchase of the Atlanta Falcons' new stadium, this one to last for 27 years. Both purchases cost tens of millions each year, but the hope is that they will increase brand awareness for Meredes-Benz.
Is the strategy working?
The Sprinter and Metris work vans notched a 14.8% increase in sales last year, outpacing the overall growth of the large van segment by a few percentage points. That's positive traction, but it's still a small portion of Mercedes-Benz's total U.S. business. Add to that the fact that the company's share of the total U.S. market hasn't budged from 2% for a while. The work-vehicle division has made some headway as consumer spending has shifted, but that has been offset by the decline in car sales.
It's probably a good move for Daimler's U.S. division, though. The car business can be cyclical, so increasing its sales in a segment that is somewhat unrelated can smooth out revenue. While advertising and brand recognition initiatives can take a long time to pay off, the current trend would suggest that Mercedes-Benz is beginning to make a little headway. While it may not be much for the likes of Ford and GM to be concerned with, blue-collar America at least has another option to choose from in the work-vehicle department.
10 stocks we like better than DAIMLER AG ORD
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and DAIMLER AG ORD wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of October 9, 2017