In its latest annual report, Brand Finance has named Mercedes-Benz as the world’s most valuable brand while Ferrari was named the strongest automotive brand. On the top 10 most valuable brands list, Mercedes-Benz took the top spot following a 24 percent year-on-year growth to $43.9 billion. This is largely thanks to an increase in in forecast revenue as car sales increased by 9.9 percent to 2.3 million vehicles. Mercedes ranked third in last year’s rankings.

Last year’s number one, Toyota, now lands in the second place with $43.7 billion (-6 percent) followed by BMW in third with $41.8 billion (+6 percent). Volkswagen kept its fourth spot with $33.7 billion (+35 percent) and Honda with $22.1 billion (+4 percent).

The other German premium makers, Porsche and Audi, are ranked seventh and ninth, respectively.

Brands that didn’t make the top ten list include Tesla, although Elon Musk’s company did see a 106% year-on-year growth to US$5.7 billion for the 19th spot.

To calculate brand values, Brand Finance uses the Royalty Relief approach, a brand valuation method compliant with the industry standards set in ISO 10668. The method involves “estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a licensor would achieve by licensing the brand in the open market.”

This involves calculating a brand’s strength using a balanced scorecard of metrics that assesses marketing investment, stakeholder equity and business performance – expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

Next, the royalty range is determined based on the importance of brand when it comes to purchasing decisions. This is then used to calculate the royalty rate together with the BSI. After that, brand-specific revenues and forecast revenues are determined, before the royalty rate is applied. The tabulated brand revenues are then discounted post-tax to a net present value which equals the brand value.

[Source: PaulTan]