Daimler AG DDAIF plans to produce battery-powered Smart cars in China by setting up a joint venture (JV) with China’s Beijing Electric Vehicle Co. Ltd (“BJEV”), per Bloomberg. BJEV is a subsidiary of Daimler’s existing Chinese partner, Beijing Automotive Group Co. Ltd. (BAIC Group) that focuses on electric vehicles (EVs). Since 2005, the company, along with BAIC Group, has been manufacturing Mercedes-Benz cars for China.

This latest initiative by Daimler is a drive to boost sales for Smart EVs in countries that are facing emission and vehicle parking issues. As of now, the company is importing small two-seater vehicles in China although, details of sales in the country have not been revealed. In 2017, global deliveries of the Smart brand have declined 7% to 135,025 vehicles. Moreover, the brand is witnessing losses since it was launch in 1998.

Earlier, in May, the company announced top-level management changes in its Smart division along with a shift in strategy toward electrification. The Smart division is aiding Daimler to compensate emissions from its high-margin Mercedes S-Class sedan and AMG GT sports cars that have combustion engines. Further, the company plans to stop using combustion engines and opt for electric models from 2020.

Daimler AG Price and Consensus

Daimler AG Price and Consensus | Daimler AG Quote

With its intention to lead the electrification trend, China is currently the top market for EVs. Further, the country aims to increase new-energy vehicle sales to 7 million units by 2025. This, along with Smart EV’s parking convenience, has encouraged Daimler to seek out customers in China for its Smart brand.

Price Performance

In the past three months, Daimler’s stock has declined 17.9%, underperforming 13% decline recorded by the industry it belongs to.

Zacks Rank & Key Picks

Daimler currently carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the auto space are Spartan Motors, Inc. SPAR, Fox Factory Holding Corporation FOXF and Allison Transmission Holdings. Inc. ALSN. Spartan Motors presently carries a Zacks Rank #2 (Buy) while Fox Factory and Allison Transmission sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Story continues

Spartan Motors has an expected long-term growth rate of 15%. Shares of the company have risen 62.5% in the past year.

Fox Factory has an expected long-term growth rate of 16.8%. Over a year, shares of the company have gained 70.2%.

Allison Transmission has an expected long-term growth rate of 10%. Over a year, shares of the company have gained 23.1%.

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