Van Race

As Rivals VW and Ford Close in, Daimler Ups Ante in Mid-Size Van Market With New, Cheaper Entry

Daimler introduces its new transporter Vito in Berlin. Source: DPA.
Daimler introduces its new transporter Vito in Berlin.
  • Why it matters

    Why it matters

    Daimler’s new Vito model could help to push down costs in the mid-size van segment and give Mercedes a stronger foothold in the United States.

  • Facts


    • The new mid-size Mercedes Vito will start at just below €18,000, about 5 percent cheaper than its existing van model.
    • Light commercial vehicle sales have been outpacing passenger car sales over the first six months of this year.
    • Daimler is aiming for a healthy profit margin of 9 percent with the mid-size van segment.
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German automaker Daimler is best known around the world for its luxury Mercedes brand, but it is also the world market leader in commercial vehicles.

It is here that Mercedes has taken a new turn this week, unveiling a new mid-size van that is designed to make further inroads into a segment currently dominated by its chief German rival Volkswagen.

The new Mercedes Benz Vito will be Daimler’s second commercial van to be sold globally. It is aggressively priced, starting at just below €18,000 ($24,000), Daimler chief executive Dieter Zetsche announced Monday evening. That puts it about 5 percent below the price of Daimler’s existing line-up of midsize vans, the Sprinter, last re-launched in 2006.

The low price poses a direct challenge to the market leaders for mid-size vans – VW and Ford. It also offers Daimler another model in a market that is growing in the developed world and emerging economies alike.

Sales of light commercial vehicles – small to mid-size vans weighing up to 3.5 tons – climbed 7.3 percent in Germany and more than 10 percent in Europe over the first six months of this year. That compares to a passenger car market that has been stagnant in Germany over the past couple of years, rising just 2.4 percent in the first half of this year.

Meanwhile European demand for passenger cars has been devastated by the European debt crisis, and is only just beginning to recover.

Ferdinand Dudenhöffer of the Center for Automotive Research at the University of Duisburg-Essen said it is only a matter of time before Daimler succeeds in taking over from VW in the mid-size van segment. While VW is competing in this market on its own, he noted that Daimler has entered into an alliance with French carmaker Renault that is helping it gain know-how and keep down costs for non-luxury models.

Daimler said it will also market the Vito in North and South America, with production lines planned in the United States and Argentina.

The United States is the world’s largest market for vans and pick-up trucks – selling more than 15 million in 2013 – and Daimler is hoping for five-figure sales here with its new product.

The Vito could also offer opportunities in developing countries, where smaller commercial vehicles like vans are typically the first segment to be in demand, feeding into industrialization even before passenger car markets are established, Dudenhöffer noted.

“They might be chasing a little bit of volume, sacrificing a bit of profit…but I’m sure it will all be balanced.”

Tim Urquhart, , auto analyst, IHS Global Insight

Despite the growth potential, commercial vehicles are a tough market to make a profit. Volker Mornhinweg, who leads Daimler’s van segment, said he expects the automaker to maintain its profit margin despite selling the new Vito at a discount. The goal remains to achieve a profit margin of 9 percent, he said, up from 7.8 percent currently.

This is ambitious in a well-established market like vans, where all players are operating with tight profit margins. Unlike Mercedes’ traditional luxury line-up, where branding and image is key, the small and medium-size companies that buy fleets of vans are looking for a good price, durability and fuel efficiency.

Tim Urquhart, auto analyst with IHS Global Insight, said Daimler does seem to have ticked all these boxes with its new Vito model and should be poised to make a big push gain market share. They “might be chasing a little bit of volume, sacrificing a bit of profit…but I’m sure it will all be balanced,” he said.

New models on the market are rarely sold at a discount to begin with. That is because while development costs are about on the same level as passenger cars, total sales of commercial vehicles are typically lower. That makes it harder to turn a quick profit at the start. But then, Daimler could have found a winning formula if its discount boosts sales quickly.

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