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Brand, product, local production and network fuel Mercedes-Benz China growth

Locally built GLA hits market at Auto Shanghai 2015

SHANGHAI – Brand, product, local production and dealer network have formed a “bundle” of factors that contributed to continued rapid growth of Mercedes-Benz sales in China during the first quarter of 2015, according to Ola Källenius, Member of the Board of Management of Daimler AG responsible for Marketing & Sales of Mercedes-Benz Cars.

Källenius made the comments on the sidelines of Auto Shanghai 2015 on April 20.

Ola Kallenius: bundle of factors help prop up Mercedes-Benz growth in China.

After a record 2014 in which the brand with the three-pointed star delivered more than 270,000 vehicles to Chinese customers for a 28 percent growth, sales in the first quarter of 2015 grew 18 percent year-on-year to 75,683 units as the brand targets sales of 300,000 vehicles for the year.

In Q1 2015, Mercedes-Benz growth in China outpaced those of luxury segment leaders Audi and BMW by at least two-fold.

“We started out very well in Q1,” Källenius told CBU/CAR in an interview. “It’s a combination of a very strong brand and that brand familiarity within the overall Chinese customer group is growing.”

Källenius said that more Chinese people feel the Mercedes-Benz brand and are reaching for it and it’s not just the S-Class at the top (China is the biggest market for the S-Class).

“It’s our wider portfolio. It’s our product offensive, the width of the portfolio and very young and fresh portfolio. It’s the styling, technology, sporty look and feel. And it’s local production,” said Källenius.

In fact, the GLA, which began local production at Beijing-Benz Automotive Ltd. (BBAC) earlier in the month, officially hit the market at the show at a price range of ¥269,800-¥398,000 ($43,516-$64,194). The GLA is the fourth model from Mercedes-Benz’s NGCC (New Generation Compact Car) product architecture and the first among many more to be locally produced at BBAC’s recently inaugurated compact car factory. It will be Mercedes-Benz’s weapon to compete with the Audi Q3, BMW X1 and Ranger Rover Evoque in the popular small SUV segment, and complement the existing locally produced GLK compact SUV.

Mercedes-Benz also launched the C 200 L 4Matic, the first C-Class ever with all-wheel drive in China, and presented the standard wheelbase variants and the C 350 e L plug-in hybrid – all locally built. That more than doubles the number of variants of the C-Class, which saw sales increase 80 percent year-on-year in Q1 2015.

“We are increasing our local production footprint,” said Källenius. “You need to have strong local production footprint to be in the game. We will have about two-thirds of our overall sales in China locally produced with the extension of the new factor at BBAC.”

Hubertus Troska

Hubertus Troska, Member of the Board of Management of Daimler AG responsible for Greater China, also attributed local production as a key success factor.

“Great products – produced locally. That’s our recipe for the long-term success of Mercedes-Benz in China,” said Troska at the Mercedes-Benz press conference. “This year we expect to sell significantly more than 300,000 units in China with another above market double-digit growth. We are very confident about our future here in China.”

The product offensive will also come from new imported models unveiled at the show such as the new GLE (formerly known as the M-Class), GLE Coupe and plug-in hybrid models such as the S 500 e L and GLE Hybrid 4Matic. The new generation of the smart fortwo also made its market premiere.

With the world premiere of the Concept GLC Coupé in Shanghai, Mercedes-Benz is betting on its broad range of SUVs to boost growth in that segment in China.

“The Mercedes-Benz SUV family is definitely growing. We will have seven models on offer here in the future, with the spectrum ranging from the compact GLA all the way to the G-Class, the founding father of the Mercedes-Benz SUV family,” said Källenius.

Dieter Zetsche: Chinese SUV market to maintain double-digit growth and Mercdes-Benz is ready to help fuel that growth.

Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, expects double-digit growth in the Chinese SUV segment to continue over the next few years. “Mercedes-Benz is ready to help fuel that growth,” said Zetsche.

Källenius believes the coupé is an important niche segment within the mainstream SUV segment. “It is a segment that is growing. It is a symbiosis between a car and an SUV that we have with the GLE Coupé and the GLC Coupé. It will be an important segment for a customer that is looking for a lifestyle vehicle with the sporty drive but also the convenience and drivability of an SUV.

Supporting the product offensive will obviously be the expansion of dealer network and in 2015, according to Källenius, Mercedes-Benz will add about 50 dealers in both different city tiers.

“It will be a combination. A lot of them will be in tier-3 and 4 cities. But also in tier-1 and 2 cities where we feel there is room for growth. We are also looking at expanding some of the existing ones. They are in the right place, but because of demand, they are too small,” said Källenius.

Nicolas Speeks

According to Nicholas Speeks, president & CEO of Beijing Mercedes-Benz Sales Service Co., Ltd. (BMBS), 200 dealers were added in the last two years and they have been of crucial value to Mercedes-Benz. “Delighting our customers and meeting their expectations is the most important element in our growth story especially in our ownership experience and their contact with the brand. Our customers remain at the core of our priority,” said Speeks at the press conference.

In the new energy vehicle space, Källenius said that by 2017, Mercedes-Benz will have about 10 different plug-in hybrid models available on the Chinese market but the China strategy will be centered around the Denza, the new EV brand created with partner BYD.

“In terms of range and technical sophistication, it is the best EV made in China. We also have the e-smart and imported EVs but they do not have the benefit of subsidies as the locally made EVs. Denza would be the answer for us in this field,” said Källenius.

With respect to the potential of China’s luxury vehicle market, Källenius forecasts healthy growth.

“With a market size of 1.5 million units, we see China as the most important luxury vehicle market in the world. China could become the largest market for Mercedes-Benz this year,” said Källenius.

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