Daimler: pretty young things

The Shanghai motor show opened on Tuesday; out front, jobless models protested organisers' decision to ban them from this year's event. On the same day, Daimler credited its pretty young models (of the automotive kind) for the record number of Mercedes sold in the past quarter. Daimler's fleet is the youngest in the upscale market, and for both kind of model, youth matters.

Daimler has had the youngest upscale offering - measured as the average of the years since each vehicle in the range was introduced - since mid-2013, and has posted correspondingly good growth. First-quarter revenues sustained this trend, growing 15 per cent from the year ago period. Margins rose to more than 9 per cent (from 7 per cent) and free cash flow tripled, beating expectations. Vroom, vroom.

The new C-Class and compact models propelled car sales to a record 460,000 units. The company plans to launch eight car models this year (along with various van, truck and bus ones). Daimler will continue to have the youngest range into 2016, when Audi will overtake it, Citi research expects.

Daimler thinks it can deliver growth in units, revenues and earnings over 10 per cent next year. This is ambitious, given that the company also cut its global car market growth forecast from 4 per cent to 3.

If the company is to keep taking car share, China is the key. Sales there are a fifth of Mercedes's total and growing. China is the world's largest car market (23m units next year, Euromonitor estimates). Daimler is growing its dealer network in China aggressively despite a recent fine following a pricing investigation by competition regulators there.

Daimler stock is up a third in the past year and trades at 12 times this year's earnings (shares of rivals VW and BMW have risen less and trade at a slight discount). For a company with a year or two left to run with the shiniest car fleet in the business, this valuation is appealing. The key risk is China, where the luxury market (as, for example, cognac makers can attest) is mercurial. But for now, Daimler rules the catwalk.

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