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Daimler to Partner Again With BMW for Auto Components

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Daimler AG (DDAIF - Free Report) is considering joining forces with BMW AG (BAMXF - Free Report) to develop key automotive components, per Bloomberg. If the plan materializes, these two German automakers are anticipated to explore the areas of sharing batteries and autonomous-car technology along with vehicle platforms. However, the tie-up of these auto giants would be limited to technology that is not brand-specific.

Huge investments to develop electric and autonomous vehicle technology compelled auto manufacturers to collaborate with peers, within and outside the industry. In an attempt to lower costs, various auto companies across the globe are joining forces to develop future-oriented technology. Apart from developing technology, partnerships are also taking place to offer car-sharing online services. The collaborations aim to stay ahead of the recently entered cash-rich players in the market.

In March, Daimler and BMW agreed to merge their mobility services business units to offer sustainable urban mobility services. Per a recent report by Financial Times, the collaboration has received the last approval from the regulators. The deal is expected to close by the end of January 2019, following which the mobility services — Car2Go and DriveNow — will operate together. The 50:50 merger will allow Daimler and BMW to strengthen their presence in car-related mobility services.

Both, Daimler and BMW lowered their profit targets for 2018, owing to high-tariffs and increased expenses to develop vehicle technology. For 2018, Daimler expects earnings before interest and tax (EBIT) to be significantly lower than €4.3 billion ($16.4 billion) generated in 2017. BMW projects full-year pre-tax profit to decrease or remain at par with 2017’s level.

Over a month, shares of both Daimler and BMW have underperformed the industry they belong to. During that period, Daimler’s and BMW’s shares lost 9% and 3.4%, respectively, compared with the industry’s decrease of 1.8%.

One-Month Price Performance

 



Zacks Rank & Stocks to Consider

Both Daimler and BMW currently carry a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Tesla, Inc. (TSLA - Free Report) and Advance Auto Parts, Inc. (AAP - Free Report) . Tesla currently sports a Zacks Rank #1 (Strong Buy) while Advance Auto Parts carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tesla has an expected long-term growth rate of 35%. Shares of the company have increased 1.2% year to date.

Advance Auto Parts has an expected long-term growth rate of 12.1%. Year to date, shares of the company have skyrocketed 53%.

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