Mercedes-Benz burns with ambition
By Wang Yu (China Business Weekly)
Updated: 2004-06-15 11:00

Premier car manufacturer Mercedes-Benz, one of the largest exhibitors at the red-hot Beijing auto show, is following a steady but ambitious expansion to further tap into the world's fastest growing market.

"We are carefully seeking further expansion in the local market, because we can not afford putting our high-profile brand in jeopardy. That is why we have not put too many vehicles into the local market over the last several years," Joachim Schmidt, senior vice president of sales and marketing, Mercedes-Benz Passenger Cars and Smart of DaimlerChrysler AG, said.

The German-based luxury car maker is not a latecomer to the Chinese market, as it has enjoyed successful sales in China during the last 10 years.

However, in terms of local manufacturing, Schmidt admitted that the firm arrived a little bit late compared to rival BMW.

"But we do so to secure the quality of our local product and to ensure local customers get the best post-sale service," Schmidt said.

According to the market manager, although local car sales slowed down a little in April and May, Mercedes-Benz achieved quite positive sales in the fast growing auto market.

"We have seen a decent 60 per cent increase year-on-year in the first five months. And we expect to sell 13,000 and 14,000 sedans in the Chinese mainland this year."

Total sales at the Mercedes unit, which includes Smart minicars and Maybach limos, were about 1.2 million cars last year. The company sells about 40,000 high-end cars annually in Japan.

DaimlerChrysler was aiming to sell 50,000 cars a year "mid-term," that is,in the next five to 10 years. Half of those would be imports, mainly of the high-end S-class sedan. Schmidt predicted that by the time sales in China hit that number, Japanese sales would be at 60,000.

"It is an ambitious plan, but it is feasible," he said.

Local production

DaimlerChrysler will start making Mercedes cars in China in the middle of next year, helping it achieve a mid-term goal of more than tripling the brand's sales in China.

The auto giant signed a US$1.1 billion deal last year with Beijing Automotive Industry Holding Co, which already makes Daimler Jeeps, to produce 25,000 C-class compact cars and E-class mid-sized sedans.

DaimlerChrysler is not yet bringing the luxury S-class sedan to China, but Schmidt says that Mercedes-Benz's expansion in China will be a gradual one.

"We would rather follow a steady expansion path in China to see how the market will react to locally-made vehicles.

"E- and C-class sedans are our core products. More importantly, we think they are more suited to the local market and have large potential for further growth in China," Schmidt said.

Since the firm is still working on the details of the local project, such as pricing, Schmidt did not proffer further information about Mercedes-Benz's manufacturing activities in Beijing.

Maybach

Also at the Beijing show, Mercedes-Benz launched its Maybach ultra-luxury brand, saying it would open dealerships in Beijing and Shanghai. Executives presented crystal keys to the first two Chinese buyers of the cars, which sell in the US for more than US$300,000.

The premier vehicle maker would not say how much it would sell for in China.

China's car sales nearly doubled in 2003 to about 2 million vehicles, though growth is expected to slow this year to about 30 per cent, analysts say.

The red-hot sector is also being targeted by the government, which fears that car firms are adding too much capacity,driving up prices for raw materials and setting the stage for a downturn in the industry.

Asked about a slowdown in the China car market, DaimlerChrysler's China Chief Executive Roman Fischer was quoted as saying by Reuters: "We think it's a temporary slowdown, especially because the economy is so strong."

"We expect it to pick up again after the China motor show. June looks a lot better than May," Fischer said.

Crossfire & 300C

DaimlerChrysler's Chrysler division, which imported 1,000 Voyager minivans last year,is also to start importing its new flagship Chrysler 300C sedan, as well as its Crossfire two-seater sports coupe, executives said.

"We are following an individualized high-end sector, which is subject to less market fluctuation," Weiming Soh, vice president, DaimlerChrysler (China) Ltd, told China Business Weekly last week.

Soh said that it was possible for the Chrysler division to localize production of passenger cars in China, but there was no time table yet.

"There may be more certain news by the end of this year," Soh added.

When asked to comment on China's new automotive industry, which encourages the development of mini-vehicle and low-emission cars, Soh said the general principle was no doubt right, but each individual firm has its core competence, and Chrysler will stick to its.

"We surely consider ourselves to be in line with the spirit of the new policy. But meanwhile, we will perform consistently to our priority and core competence. For instance, we are determined to continue our domination of the sports utility vehicle (SUV) market with our flagship Jeep products," Soh said.

DaimlerChrysler's SUV products, made jointly with the Beijing Jeep venture, accounted for 18 per cent of the local market share in March and 22 per cent in April.

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