Mercedes-Benz to outline strategic plan for China

But Yale Zhang, head of Shanghai-based consulting firm Automotive Foresight, said he believed the objective was "doable", partly due to the array of "strong new products they are planning to put in play over the next year".

Aside from the slew of new products, Troska aims to make Mercedes-Benz cars more affordable by producing significantly more of what it sells in China.

The turnaround plan envisages seven out of 10 cars it sells in China will be made in the country by 2015 - up from around half now - a move that would allow the company to avoid the high tariffs and taxes levied on imported cars.

The primary lever to boost in-China production is the new compact GLA SUV that the German carmaker plans to produce at its factory complex in Beijing, which is jointly run with state-owned auto group Beijing Automotive Group, the sources said.

The GLA, which is intended to be a more affordable luxury car, is due for a launch in China next year.

German precision, made in china

"The days when Chinese consumers thought Mercedes is Mercedes only when they are made in Germany are long gone," a Mercedes-Benz official told Reuters. "If you can deliver German precision and quality in products you produce here, Chinese buyers have no problem at all with them and consider them genuine Mercedes."

It was not immediately clear whether the move to cut prices by boosting local production was in any way a response to a wave of Chinese government investigations into possible anti-competitive violations in the way that global companies, including car makers, price their products in China.

Mercedes-Benz hopes to respond more quickly to changing consumer preferences, which often lead to swings in demand for different types of vehicles, by producing more cars locally.

Cutting prices "is not a bad idea given China's economic growth slowdown", said Jeff Chung, a Hong Kong-based auto-sector analyst for Japanese brokerage Daiwa Securities.

Nonetheless, demand for luxury cars in China is likely to reach 2.7 million vehicles a year by 2020, displacing the United States as the world's biggest luxury car market.

As the economy slows, "even wealthy consumers are likely to shift to more affordable luxury cars, most of which are produced locally in China rather than being imported", Chung said.

That's how Volkswagen AG's Audi, the No 1 luxury brand by volume in China, stays ahead of its German rivals that together dominate China's top-end market. Audi produces more than nine out of 10 cars it sells in China, according to Daiwa's Chung.