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Ferrari, VW & Mercedes Benz: Deep Asia Dependence

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Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

For European carmakers Mercedes Benz, Volkswagen Group and Ferrari N.V., the past year has been rather interesting, with new markets and possibilities.

Mercedes Benz had recently completed the “spin-off and hive-down” of its Daimler Trucking Division while Volkswagen continues to hold its Scania, MAN and Navistar commercial vehicle divisions under the same corporate umbrella. Meanwhile, Ferrari (with its catchy “RACE” ticker) remains resolute and unchanging: it still manufactures and sells high-end performance cars. In certain silhouettes and profiles, Ferrari encounters competition from Volkswagen’s Lamborghini and Porsche marques. Volkswagen also competes with Mercedes Benz’s offering of premium sedans predominantly via its Audi and Bentley marques.

Both Mercedes-Benz and Volkswagen have deep ties with Chinese carmakers to access the mass market near the “premium” end of the addressable market. The Chinese market is predominantly serviced via factories operated in alliance with these carmakers in China. They also run factories held by subsidiaries in India.

Meanwhile, Ferrari continues to operate out of one factory in the Italian city of Maranello ever since it moved there in the 1940s under threat of Allied bombing raids during World War II.

As all three companies prepare to announce financial results within the next few weeks, some trends merit examination and consideration.

Fiscal and Regional Trends

Earnings reports from Mercedes Benz, Volkswagen and Ferrari indicate that all three carmakers have very interesting trends in key fiscal line items:

While revenues of the “prancing horse” pale in comparison to that of its Teutonic peers, it delivers the highest percentage of net profits. The recently-lightened Mercedes Benz is the leader of the two German houses while Volkswagen technically isn’t far behind.

The sales volumes of the three carmakers, however, deliver a lot of valuable insight:

There are three heat maps employed in the analysis. The first heat map is in the “segment contribution” along each company’s regional lines. Key facts here are:

  1. Mercedes Benz’s largest single market is China, which is holding steady at 32-33% mark. It bears noting that while China is its largest market for cars, Europe is its largest market for vans. In the European market, Germany accounts for 35-38% of all sales. In North America, the U.S. accounts for a lion’s share of sales.

  2. Volkswagen’s largest market is Europe/Other Markets (i.e. continental Europe, South Africa and Türkiye) and present trends indicate its share growing here. Meanwhile, it’s “Asia-Pacific” share is slipping. This has been attributed to weakened sales in China while its rising sales in India are running off a low base. Both China and India also have very strong competitors in the form of both indigenous as well as Japanese carmakers.

  3. Ferrari’s second-largest market is the entirety of Asia which has risen from 23% of total market share to 30% in Q1 this year. It’s EMEA (i.e. “Europe, Middle East and Africa”) market has been showing a gradual decline while the Americas have been holding (mostly) steady in sales.

The second heat map examines the Year-on-Year (Y-o-Y) trends in sales per region across full financial years (FYs). Key takeaways are:

  1. After a strong boost in sales in North America in 2021, Mercedes Benz had held steady in North America (especially in the U.S., its second largest single market for cars). Meanwhile, China has seen a steady incremental rise in demand across 2021 and 2022.

  2. Volkswagen is showing an overall slippage in sales trajectory in “Europe/Other Markets” but this is increasingly being buffered by very strong growth trends in North America (again, the U.S. is the dominant market here).

  3. Ferrari’s sales trends have been positive all around and are particularly strong in Asia – with China, the Hong Kong Special Administrative Region and Taiwan leading the pack over all other countries in the continent.

The third heat map is the “Quarter versus Year” (Q-vs-Y) wherein the most recent quarter’s results are compared relative to the sales figures for the region in FY 2022. Thus, the “optimal health” line would be at 25%. If it runs above, sales trends for the year can be assumed to be in excellent health (barring new information). This heat map also adds further context to the second heat map. Key trends here:

  1. For Mercedes Benz, sales in Europe and China are running in excellent and optimal health. Sales trends in Europe in the year so far, in particular, seem to be en route to recovering ground lost in 2021.

  2. The Europe story seems to be resonant in Volkswagen as well; however, the decline in sales has been prevalent for some time now. Meanwhile, North America seems en route to be paying off in spades while South America and Asia seem to be running at sub-optimal rates.

  3. Every one of Ferrari’s regions are running at excellent health and adding to strong year-wise trends.

The “North America/U.S.” story prevalent in both German houses is particularly interesting. Both carmakers have a very strong showing in Electric Vehicles (EVs) and have ben registering bigger and bigger sales numbers worldwide – with the bulk of sales traditionally seen in Europe. Now, trends indicate that they’re steadily capturing EV market share away from Tesla in the latter’s home turf, wherein an over-catered “creamy layer” customer segment is increasingly finding the plethora of choices made available from foreign carmakers to be increasingly appealing. The two German houses’ luxury marques have also been seeing a steady surge in popularity in recent years, which will likely also be quite sustainable in the mid- to long-term. However, in terms of sheer volume, Asia will loom large in their windscreen in the short- to mid-term.

Meanwhile, the Italian horse has plenty of cause to prance on account of its enduring brand equity all over the world.

Market Performance and Key Items of Interest

Considering the fact that an increasing number of investors have been moving to broad funds over individual tickers in the year so far, an analysis of comparative performance of these three carmakers’ stocks versus the broad-market S&P 500 (SPX in index form and SPY in ETF form) and the tech-heavy Nasdaq-100 (NDX in index form and QQQ in ETF form) would be in order.

Note: Since Mercedes Benz and Volkswagen are listed in German bourses, the instruments used to represent them are MBGAF and VWAGY respectively.

Both Ferrari and Mercedes Benz have broken ranks from very heavy correlation with the market in the beginning of Q4 2022 and have been rising up and away well past both indices since (with the “horse” leading by a nose). Meanwhile, since the latter half of Q1 this year, Volkswagen has been trailing the market after news broke of poor sales performance in China.

However, it bears noting that all three carmakers have had their best net profit showing in years in the most recent quarterly update. All three carmakers have global market experience spanning nearly a century now, with matured factories, top-of-the-line products and (as clearly evident) excellent fiscal discipline. Therefore, Volkswagen’s relative lack of performance is more an expression of investor sentiment which is likely misplaced. While it’s true that it’s in decline in China, its leadership can be assumed to have sufficient skill and flexibility to continue to maintain its profit margins.

Another interesting facet about Volkswagen is its Passenger Car/Commercial Vehicle mix. Going from a 44:1 ratio in 2019, it has made lightning strides in diversification, with the most recent quarter showing a 23:1 ratio. This is decidedly not a simple accomplishment.

It’s very likely that Volkswagen even further improvement in this mix to bring Commercial Vehicle sales on par with that of the previous year. However, what might inject even more vigour to the stock’s performance would be if the company were to announce a “spin-off and hive-down” of its commercial vehicles divisions a la Mercedes Benz. Given that cost of sales tend to be higher for commercial vehicles along with the added burden of arranging financing et al, this might inject more investor confidence. Both of these considerations are key items to look for in the next update on the 27th of July.

While stock trajectory in the next few quarters might be choppy given macro uncertainty, all three carmakers are certainly good candidates to be part of an investment strategy. A number of Exchange Traded Products (ETPs) carry the potential for magnified gains off these stocks in short-term tactical trade scenarios: VOW3 gives a 3X leveraged exposure to the upside of Volkswagen’s stock performance while VWS does the same on the downside. MBG3 gives a 3X exposure to Mercedes Benz while MBGS does the same on the downside. RAC3 gives 3X on the upside of Ferrari while RA3S does the same on the downside.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.
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Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

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Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

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Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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