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April 23, 2014

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Home » Business » Autotalk Special

Mercedes-Benz eyes faster growth in China

By Richard Fu | April 23, 2014, Wednesday | Print Edition

DAIMLER’S Mercedes-Benz is eying faster growth in China this year, as the German luxury marque set out its stall this week at Asia’s most important auto show in Beijing.

Sales rose 11 percent in 2013 on strong momentum in the second half. That was followed by another 47 percent jump in the first three months of this year.

“We are confident that we can exceed the growth rate that we had last year,” Nicholas Speeks, president and CEO of Beijing Mercedes-Benz Sales Service Co, said in an interview during Auto China 2014, where it is showcasing 33 models that also include the smart and AMG brands.

To spur growth, it will continue to introduce new models tailored for China and open dealerships in more cities where it had no presence before.

At the Beijing show, which started on Monday and lasts through April 29, Mercedes-Benz is staging the world premiere for its Concept Coupe SUV, the industry’s latest attempt to blend utility with coupe design.

The four-door, all-wheel-drive crossover concept car extends to a length of almost 5 meters and is 2 meters’ wide thanks to its broad shoulders and flared wheel arches. It also has a modest height of about 1.75 meters, exhibiting the flat, extended roofline that is typical of a sports coupe. It’s set to become another hit in the SUV crossover segment, a blend of high-riding SUV and sporty coupe.

“There are, of course, already a number of SUV crossovers on the market. But we have opted for a different, more distinctive approach: Our starting point was a thoroughly sporty coupe, to which we have added our comprehensive off-road expertise,” said Dr Dieter Zetsche, chairman of Daimler AG and head of Mercedes-Benz Cars.

Also, the long-wheelbase version of the new C-Class designed exclusively for the China market is having its debut in Beijing. With more than 150,000 units sold, the predecessor to the new C-Class has become one of the “most important pillars” of Mercedes-Benz’s business in China, and the new model will be one of its “most important growth factors” in the Middle Kingdom, the company said.

At 4,766 millimeters’ long and with a wheelbase of 2,920 millimeters, the new long-wheelbase version of the all new C-Class exceeds the standard version by 80 millimeters, providing the longest car length in its segment, as well as maximized back-seat legroom.

Mercedes-Benz said around 20 new or extensively redesigned vehicles will have been launched by 2015 in China, including the new GLA, which will also be locally produced.

Currently, about 54 percent of Mercedes-Benz vehicles sold in China is locally produced, and the share of local production is set to continue to rise, according to Speeks. Daimler and its local partner Beijing Automotive Industry Corp (BAIC) will jointly invest a total of 4 billion euros (US$5.5 billion) in Beijing Benz Automotive Co (BBAC) through 2015, of which 1 billion euros will be used solely for the expansion of local car and engine production capacity.

Mercedes-Benz is also accelerating expansion of its distribution network in China to catch up with the market demand. This year, it aims to add 100 dealer outlets, covering 40 new cities. About two-thirds of the new outlets will be in Tier 3, 4 or 5 cities as Mercedes-Benz penetrates deep into the regional market, Speeks said. Meanwhile, it wants the quantity to go with quality. In June, Mercedes-Benz will open another training center in Shanghai, which will be its largest passenger car training center around the globe.

Hubertus Troska, member of the Board of Management Daimler AG and Chairman & CEO of Daimler Greater China Ltd, said the expansion plan will help the company catch up with other premium German competitors in terms of distribution network in China.

“The new products, rapidly growing distribution network and increasing proportion of local production give us confidence that we will achieve our goal of over 300,000 units in annual sales by 2015,” Troska said.

Mercedes-Benz also announced a leasing program at the Beijing show to give more people the opportunity to drive a Mercedes-Benz car as it continues innovation in its financing business. Consumers, subject to a relatively low monthly payment, could opt for purchase, return or trade-in of their car after the contract period ends.

Daimler also aims to expand its footprint in China with a locally produced all-electric car called the DENZA. With the development of the country’s electric vehicle market below expectations, the company sees potential in the segment.

“China is the biggest market for passenger cars in the world already, and it has the potential to also become the biggest electric vehicle market,” Troska said. “I can sense there is a strong government push to develop this market.”

To reduce pollution, China’s government has a target of having 500,000 electric or hybrid vehicles on the road by 2015 and is offering subsidies for those developed locally. But the target looks increasingly unrealistic after the market had a slow start due to high costs and a lack of infrastructure.

Troska while said development is below the government’s own expectations, it’s a common situation also seen in other countries including its home turf in Germany.

The DENZA, jointly developed by Daimler and Shenzhen-based BYD, a leading Chinese battery and electric car producer, is priced at 369,000 yuan (US$59,170) but will be eligible for government subsidies of up to 120,000 yuan when it goes on sale in September.

In electric vehicles, Daimler is working with BYD in China and Tesla in the United States. Zetsche said that’s a strategy it adopts when the industry is still at its early days.

“The markets are still in the early stage of development,” he said. “We test the waters with different partners in different markets on different technologies.”

Swiss power group ABB is developing wall-mounted electric-car chargers with BYD and Daimler for the DENZA.

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