Serving the World's Largest Emerging Automobile Market
Home > Feature > Daimler CEO Ola Källenius: “in China, for the world” with help from Chinese partners

Daimler CEO Ola Källenius: “in China, for the world” with help from Chinese partners

UPDATE: Mercedes-Benz set new sales records in China in both September and the year to date: 61,664 cars were delivered last month (+12.9 percent) and 525,890 units were sold since the beginning of the year (+5 percent). It also achieved the best quarter of all time in China with 181,233 units sold (+12.9 percent) in the July-September period.

FRANKFURT – Daimler, under the helm of new CEO Ola Källenius, will be “In China, for the world” with help from Chinese partners.

“We feel that with these relationships we have, not only can we further develop our position in China, but also in China for the world,” said Källenius. “I would like to look at it as opportunities as opposed to complicated (relationships).”

Källenius made the comments in an interview on September 10 at IAA 2019 shortly after speaking at a major auto show for the first time since becoming the new Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars on May 22, taking over the positions from long-time CEO Dr. Dieter Zetsche after Daimler’s Annual General Meeting.

The Chinese partners he was referring to are BAIC Group, BYD and Geely, and each of them will play crucial roles as Daimler continues to solidify its leading position in the premium segment and push ahead its C.A.S.E. (connected, autonomous, shared and electric) strategy in the world’s largest auto market.

“Since many years, (we have had) a very strong relationship and successful joint venture with BAIC. That’s the foundation for Mercedes in China,” Källenius told CBU/CAR in response to a question on how Daimler would balance the complicated web of relationships it now has with the three partners especially considering that BAIC Group and Geely have also become shareholders in the German automaker. “We have built this partnership and invested billions of Euros in increasing our footprint in China together with our partner, not only on operations and production side, but recently increasing our footprint in R&D, and of course on the sales side and aftersales side as well. We see an opportunity to continue to develop this partnership and take it to new levels.”

The new ¥1.1 billion R&D Tech Center China, which was announced last November and located right next to Beijing-Benz, the vehicle joint venture between Daimler and BAIC Group, is expected to be completed by March 2020, according to Markus Schäfer, Member of the Board of Management of Daimler AG responsible for Group Research & Mercedes-Benz Cars Development in another interview.

If BAIC Group is the backbone of Daimler’s partnerships in China, then BYD serves as a complementary partner to Daimler’s electric initiative in China.

“Some years ago we decided to do a JV with BYD for BEVs. That’s what we have announced in June when we showed the market there will be another fruit of that partnership coming into the market in the spring of next year,” said Källenius. “That’s a clear and defined activity where we are complementing the Mercedes NEV portfolio with an attractive Denza SUV product.”

The Denza SUV product Källenius is referring to is the Denza X, which is produced by BYD, styled by Mercedes-Benz and sold through Beijing Mercedes-Benz Sales Services Co., Ltd. (BMBS) when it hits the market next Spring.

Geely, which has been the largest shareholder in Daimler since February 2018, recently invested into German flying car startup Volocopter that Daimler also has a stake in, and has joint ventures with Daimler to rejuvenate the smart brand and offer premium mobility services in China, will do things with Daimler that “make sense for both parties,” according to Källenius.

“Where we have a project where we can create a win-win, not to conflict with other activities we are doing in China obviously, and where we can together define technologies or businesses that benefit both parties,” said Källenius.

Hubertus Troska, member of the Board of Management of Daimler AG responsible for Greater China for nearly seven years, added that it’s not entirely unusual for foreign automakers to have different relationships with multiple Chinese customers.

“There is still no silver recipe,” he told CBU/CAR. “We believe on building on the trustful relationships with our partners, being very straight forward and honest with each other we can further develop opportunities and (our) position in the Chinese market. We feel very positive about our development with all three partners.”

Källenius emphasized that as China is by a wide margin the biggest market for Mercedes-Benz in the world, with sales this year expected to reach nearly 700,000 units, twice that of the U.S. market, preferences of Chinese customers will be of huge importance for the future development of the brand especially considering there is a growing group of younger people coming into the segment.

“On the technology side, China is a country of innovation,” said Källenius. “We are growing our R&D activities in China. Because we see many attractive companies that begin small and are developing technologies that we think can be beneficial for our customers. What used to years ago be in China for China, is today for us, in China, for China and the world. We have a wide range of suppliers already and some of these suppliers are coming out of China and investing in other places of the world, building factories where we have factories as well. It’s better for logistics and cost reasons.”

He indicated that there are about 300-400 Chinese engineers that already work at Mercedes-Benz in Germany and the roughly 37,000 Chinese students that study in Germany today provide an opportunity for Mercedes-Benz to recruit the best ones from this talent pool.

“(Our) central engineering in Stuttgart recognized that not only is the biggest customer base in China, (it also has) the youngest one and most connectivity oriented. When we look at connectivity solutions, digitalization of interaction of customers, it’s great to say that some of the new development that comes out of China will be applied to the world. We have to be in China in order to drive processes and connectivity ideas the world alike.”

Two big announcements that came from Daimler during the IAA 2019 is the selection of Chinese battery supplier Farasis Energy (Ganzhou) Co., Ltd. as one of its first carbon-neutral battery cell suppliers for passenger vehicles and CATL as a battery cell module supplier for Daimler’s electric trucks starting from 2021. The moves are crucial as Daimler embarks on its “Ambition 2039” strategy to transform its full range of passenger cars into a carbon-neutral product range as of 2039 and electrify its trucks and buses. The agreements also ensure battery supply as Daimler aims to increase the proportion of electrified vehicles (battery electric and plug-in hybrid vehicles) among new PV sales beyond 50 percent by 2030, part of a new strategic initiative laid out by Källenius at the IAA to develop the Mercedes-Benz brand into a “sustainable modern luxury” brand geared toward e-mobility. That plan also includes CO2-neutral energy supply for almost all locations in Germany and CO2-neutral vehicle production in Europe by 2022.

The agreements with Farasis and CATL are what Källenius calls a way to manage a strong set of battery suppliers to compete globally while building on its own battery cell production competencies.

“At the moment, there is very intense competition going on both on a technical side as well as the commercial side with regard to battery technology. You have large players and you have a range of startups that are working on battery technologies perhaps even game changing in the next 5-10 years,” said Källenius. “Inside Daimler, we are one of the few OEMs that have our own cell production as well. On R&D, we understand the battery cell all the way down to the cell chemistry. On a technological side, we are a co-partner of developing future batteries but we have decided for commercial reasons that sourcing the production of these cells is best with these competent suppliers. I would expect very wide range of development in this space over the next few years, because we are moving into all new production across the world now. We will carefully select the suppliers that we think that give the best product promise to our customers.”

Commenting on Chinese market growth, Källenius said that Mercedes-Benz had tremendous growth over the past seven years thanks to attractive portfolio, expansion of its dealer network and experiences that are appreciated from Chinese customers and fans, and expects that growth to continue.

“We believe that the Chinese market has growth potential going forward over the next 5-10 years, we see opportunities that we want to capture,” he said.

Leave a Reply