Mercedes-Benz Hits Speed Bumps In China

Company To Restructure Dual China Units To Grow “Significantly” 

2012 Mercedes-Benz S350 BlueTEC 4MATIC

As rivals Audi and BMW maintain impressive growth even amid a less ebullient auto industry environment in China, Mercedes-Benz has faltered in 2012, owing mostly to an inconsistent strategic blueprint. Coming off a highly successful 2011, during which the auto heavyweight sold a record 198,520 Mercedes-Benz, smart, Maybach and AMG vehicles in China (a 35 percent increase year-on-year), Mercedes has seen deliveries rise a tepid 6.7 percent this year, compared to gains of over 30 percent for BMW and Audi. As Marc-Rene Tonn of Warburg Research remarked this week, “China is definitively a problem area…They have to take action.”

However, the difficulties encountered by Mercedes-Benz in China this year don’t simply boil down to lack of activity. This year, the automaker launched the all-new M-Class and B-Class in the country, catered to the country’s fashion set with Mercedes-Benz Fashion Week, and had a very strong presence at Auto Beijing, the Xi’an Auto Show and the Changchun International Automobile Expo. However, it seems that many of Mercedes-Benz’s key problems in the Greater China region may be mostly due to fundamental structural deficiencies. As eMercedesBenz writes this week of Chief Executive Dieter Zetsche’s plans to turn around his company’s China operations:

For a start, Zetsche is combining two separate sales units — one for imported vehicles and other for locally made cars — into a single entity. Sales chief Schmidt said the goal of the restructuring is to grow “significantly” in China again. Mercedes’s efforts to expand its appeal with new models and re-spark growth in China are expected to bear fruit and offset plans by BMW to add a factory in Brazil and by Audi to expand in Mexico.

Considering the brand’s significant reputation among Chinese consumers, solid dealership network, and savvy use of social media, we fully expect Mercedes-Benz to remain a leader in the China luxury auto market. However, unless it manages to enact Zetsche’s plans for restructuring and fully gets its house in order, Mercedes may see the likes of Audi, BMW pull even further ahead as competitors like a resurgent Jaguar Land Rover (JLR) approach ever closer in the rear-view mirror.


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