January 11, 2013

China Top Priority For Mercedes-Benz In 2013

Daimler Moves To Overtake Rivals Audi & BMW In Key Market

The China-produced version of the GLK Class includes more legroom and Chinese-language voice support

Although rumored plans by the Chinese state-owned China Investment Cooperation (CIC) to acquire as much as 10 percent of Daimler have yet to be confirmed — and indeed have been denied – CIC’s reported interest has certainly had a positive influence on Daimler’s performance at the stock market as of late. This is good news for the German automaker, coming off an overall successful 2012, yet the company still has many challenges to face, particularly when it comes to China, the world’s largest car market. China is already Daimler’s largest consumer market for the high-end Mercedes-Benz S-Class, and accounted for a full 10 percent of the automaker’s revenue in the first three quarters of 2012. Yet Mercedes-Benz deliveries rose only 1.5 percent in China last year, with total sales of 196,211 in 2012 lagging far behind Audi’s 370,559 and 274,985 by BMW.

Despite this underperformance in mainland China and a weakening market in Europe, 2012 can still be considered a good year for Daimler. With record sales of over 270,000 vehicles, the US market grew by 11.8 percent, outpacing Daimler’s largest market, Germany, for the first time. Worldwide, the automaker sold a record 1.42 million vehicles last year. However, having missed its 1 billion euro operating income target, Daimler’s Mercedes-Benz division will implement 2 billion euros (US$2.6 billion) in cost cuts by the end of 2014. Regardless of last year’s mixed results, Daimler in general and Mercedes-Benz in particular remain optimistic.

In a recent interview with the Boersen Zeitung, Daimler Chef Executive Dieter Zetsche stated that he is confident that Daimler will overtake rivals BMW and Audi by 2020 at the latest. He also hopes to reach this target within his time in office. In an earlier press release, Zetsche already noted the importance of China as the key element of the company’s growth strategy over the next decade. In order to meet Zetsche’s goals, however, Daimler AG had a good deal of house-cleaning to do in China last year. Last month, Daimler finally merged its two Mercedes-Benz sales units in China into a single entity, the Beijing Mercedes-Benz Sales Service Co, a 50/50 joint venture between Daimler and its Chinese partner, BAIC. The unified company will distribute imported as well as locally produced vehicles and handle marketing, after-sales, used-car and fleet sales. Additionally, the company will be responsible for further development the Mercedes dealer network.

2012 Mercedes-Benz S350 BlueTEC 4MATIC

As Jing Daily previously reported, the complexities of managing two separate Mercedes-Benz sales units in China contributed heavily to the marque’s underperformance in China even as its competitors BMW and Audi — both of which manage Chinese sales through a single distributor — raced ahead. Overseeing Daimler’s merged companies in China through a new board position is Hubertus Troska, a senior company executive, who spent over 24 years managing Mercedes-Benz truck operations in Europe and Latin America. Troska will hold the post until December 2015 at the earliest.

According to Stefan Bratzel, head of the Center of Automotive Research in Bergisch-Gladbach near Cologne, another problem with Daimler’s strategy in the China market is that the automaker failed to introduce new models at appropriate prices, establish cohesive brand positioning, and take into account the preference of wealthy Chinese buyers for luxury SUVs like Porsche’s Cayenne or BMW’s X5. As such, it’s not surprising that the Daimler has set about improving these and other marketing strategies in its China Sales Initiative 2015 project.

As set out by the project, the company plans to increase car deliveries in China by a third by 2015, targeting a yearly sale of 300,000 vehicles in the premium segment, with two-thirds of these being manufactured locally. Daimler also plans to release 20 new Mercedes-Benz models in China over the next three years, especially the popular B and M Classes, and add around 50 dealerships per year to bring the total to 220 by 2015. Chasing the emerging middle class, Daimler’s focus will center on second- and third-tier cities, particularly in western China. In addition, Daimler will also expand Financial Services within its Leasing Service division, which the company has been providing in the area of automotive financing in China through Mercedes-Benz Auto Finance China since 2009.

Auto / Business & Finance / Lifestyle
Tag: auto market, automaker, china, china luxury... , More
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