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China in the spotlight as Daimler reports record earnings

Daimler reported record unit sales, revenue and earnings at its 2016 Annual Press Conference held in Stuttgart, Germany on February 4.

But it felt like the event took place in China.

The fact that more than a dozen journalists from China were invited to attend the event and China resonated throughout the two-hour event made it feel that way. China was mentioned early and often, both in the presentation given by Dr. Dieter Zetsche, chairman of the board of management of Daimler AG and head of Mercedes-Benz Cars, and Bodo Uebber, board of management member at Daimler AG responsible for finance & controlling, as well as in the Q&A session that followed.

China, which saw Mercedes-Benz cars deliveries jump by 35 percent to an all-time record of 363,557 units, became the biggest global market for the luxury brand. This achievement appeared on page 6 of the 72-page presentation. The first journalist that asked questions had one on the prospects of the China market in 2016.

Both Dr. Zetsche and Uebber offered strong optimism and confidence on the prospects of the Chinese market as well as Mercedes-Benz’s performance there in 2016, somewhat surprising given a higher volume base and tougher competitive and regulatory environments.

“We are very confident and positive that the overall market (passenger vehicles) will grow at 8 percent and we expect to gain further market share in the country,” said Dr. Zetsche. “Many observers are currently very skeptical with regard to China. We are confident, however, that we can stand out from our competitors on the basis of our attractive product range, very good financial-support and the increasing localization of our products,” said Uebber.

Daimler’s success in China and in particular Mercedes-Benz, over the last three years especially in 2015, is simply the result of sound and basic business principles. Its close cooperation with partners such as BAIC Motor, BYD and Fujian Motor, its product “fireworks” of 2015, dealership network expansion, localization of products, and more importantly making its dealers and customers happy, were major reasons why it was able to buck the trend in the luxury segment last year.

Daimler also had one key advantage over its two German rivals in China: a stable team led by Hubertus Troska, board of management member at Daimler AG responsible for China, and Nicholas Speeks, president and CEO of Beijing Mercedes-Benz Sales Service Co., Ltd. (BMBS). The Troska-Speeks tandem has helped Mercedes-Benz achieve 34 consecutive months of growth in China ever since the creation of BMBS about three years ago, following two years of market contraction owning to a distribution mess.

With 500 dealers in place and 10 more new products coming this year, Mercedes-Benz is positioned to grow further in China but likely at a much more moderate rate.

It will be interesting to see if it can catch up to, or even surpass, its closest rival in China – BMW.

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