Mercedes-Benz, 123fahrschule, BYD – Between crisis and recovery

Mercedes-Benz – Aiming to optimize its electric vehicles

The Mercedes-Benz Group suffered significant financial setbacks in the third quarter. Revenue fell by 7% year-on-year to EUR 34.5 billion. The slump in operating profit was even more severe, with a 48% drop to EUR 2.5 billion. Earnings per share halved to EUR 1.81. Although free cash flow of EUR 2.4 billion was slightly above the previous year's figure, net industry liquidity fell by 9% year-to-date to EUR 28.7 billion. Higher production costs, unfavorable market conditions and a 31% decline in battery electric vehicle (BEV) sales had a negative impact.

During the earnings call, Mercedes-Benz commented on the weak results and pointed to challenges from increased competition, rising costs and a challenging market environment, particularly in China. At the same time, the Company confirmed solid liquidity, which makes it possible to continue generous dividend payments and share buybacks despite falling profits. No recovery in sales is expected in the fourth quarter, but in the US, the market continues to show growth potential. Mercedes-Benz emphasized its strategic priorities, including investments in new technologies and platforms such as autonomous driving and electric vehicles.

Planned battery upgrades for the EQE and EQS models are expected to increase their range. At the same time, the all-electric G-Class will be equipped with innovative technologies for off-road capability. In addition, considerable investments are being made in new vehicle platforms, such as the MMA architecture, which should enable more efficient charging times and sustainable production from 2025. In addition, the Stuttgart-based company is researching sustainable solutions such as "solar paint" for electric vehicles to set new trends. The question remains as to when demand for luxury EVs will recover. The share price recently formed a double bottom at EUR 51 on its downward slide and is currently trading at EUR 52.12.

123fahrschule – Digitization as the key to success in the driving school market

123fahrschule SE, Germany's largest driving school chain in the B segment with over 60 locations, is consistently driving forward the digitization of driver training. The focus is on the use of innovative technologies such as driving simulators and e-learning platforms. These enable more individualized and efficient training processes and compensate for the increasing shortage of driving instructors in Germany, where a third of driving instructors are already 60 or older, meaning a wave of retirements is imminent. There is already a need for qualified new talent. With ambitious expansion targets, including reaching 200 locations by 2027, the Company is striving to revolutionize the German driving school market and establish itself as the digital market leader.

Future regulatory changes are accelerating the use of cutting-edge technologies in driver training. These include online theory lessons and the increased use of simulators, which enable a more flexible and cost-efficient way to obtain a driver's license. With up to 20% fewer vehicles required and reduced instructor requirements, 123fahrschule is positioning itself not only as an innovator but also as a cost leader. CEO Boris Polenske views these changes as a great opportunity to reduce driving license costs by up to EUR 1,000 – a potential competitive advantage in a highly fragmented market estimated to be worth EUR 3 billion.

The business figures underscore the solid growth of 123fahrschule. With record revenue of EUR 5.7 million in the third quarter and an operating cash flow of around EUR 1.5 million in the first nine months (previous year: just EUR 387,000), the strategy is proving a success. The planned introduction of franchise models for smaller towns and investments in digital solutions such as self-developed software or state-of-the-art simulators offer long-term growth prospects. Analysts see great potential in the share: with price targets of EUR 6.20 (mwb research) and EUR 7.20 (NuWays) and an expected increase in margins, 123fahrschule remains an exciting investment option for investors who believe in the digitalization and consolidation of the driving school market. The stock has recently consolidated significantly, but seems to be forming a double bottom at EUR 2.28 and currently costs EUR 2.36.

BYD - China's electric vehicle giant between growth and challenges

The Chinese carmaker BYD continues to impress with strong sales figures. In October 2024 alone, the Company sold 502,657 so-called New Energy Vehicles (NEV), an increase of around 67% over the previous year. Since the beginning of the year, sales have totaled over 3.25 million vehicles - an increase of 36.5%. In the third quarter, BYD also overtook Tesla in terms of financial performance for the first time, generating revenues of around EUR 26 billion and a net profit of around EUR 1.5 billion. Despite these impressive figures, BYD remains heavily focused on its domestic Chinese market, which accounts for 90% of sales. This highlights the challenge of also becoming internationally competitive.

International expansion is a central component of BYD's strategy. Given the EU's punitive tariffs on Chinese electric vehicles, the Company is making targeted investments in local production facilities. Planned factories in Turkey and Hungary should facilitate market access, as they can circumvent EU punitive tariffs and create competitive advantages through shorter supply chains. This model is already being pursued with similar projects in Mexico for the North American market. At the same time, BYD is expanding its model range for Europe. The new additions include the Seal U, a mid-size SUV, as well as innovative high-end models such as the Yangwang U8, which are specifically targeted at different customer segments.

Founded 20 years ago as a battery manufacturer, BYD has long since established itself as the market leader in the field of electrified vehicles. With revolutionary technologies such as its proprietary Blade Batteries and vehicles built on the digital e-platform 3.0, the Company sets new benchmarks in efficiency and range. While the focus has so far been on pure electric and hybrid vehicles, BYD is also addressing the growing demand for premium vehicles and expanding into new segments. Nevertheless, it remains unclear whether BYD's dependence on its home market can be overcome in the long term – a crucial factor for the success of its IPO and the trust of international investors. Although the share has outperformed those of German carmakers, BYD's shares have also lost ground and are currently trading at EUR 30.62.

Electromobility faces challenges worldwide, but also opportunities that companies are tackling in different ways. Mercedes-Benz is struggling with weak sales and rising costs, but wants to strengthen its market position in electric vehicles through battery upgrades and new platforms. 123fahrschule is benefiting from the continued boom in driving licences and is focusing on digitalization and efficiency to become the market leader in the German driving school market. BYD is growing rapidly thanks to strong NEV demand in China, but is facing hurdles internationally and is working on expansion strategies such as new production sites. While Germany is in a state of flux, the Chinese market is demonstrating what is possible with its dynamism.