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With EQC and new compact car coming, Mercedes-Benz focuses on solidifying foundation for further China growth

The EQC will begin production at BBAC in 2019.

GUANGZHOU – Mercedes-Benz is in no mood to bask in the record sales numbers it has continued to rack up in China and its current status as the top selling luxury brand in the country, senior executives made clear in an interview on November 17 on the sidelines of Auto Guangzhou 2017.

“I don’t know and I don’t care,” said Nicholas Speeks, President & CEO of Beijing Mercedes-Benz Sales Service Co., Ltd. (BMBS), in Chinese while responding to a question on whether Mercedes-Benz would be able to maintain its sales momentum and luxury segment leadership in 2018 and beyond.

A few minutes earlier, Speeks had announced at a press conference that Mercedes-Benz delivered 507,742 vehicles (including smart) in the first 10 months of 2017 in China, up 27 percent year-on-year and the sales total for all of 2016.

Mercedes-Benz has already sold more than 500,000 vehicles (including smart) in China in the first 10 months of 2017.

October became the 56th consecutive month of growth for the brand of the three-pointed star in China dating back to February 2013, helping it to maintain its status as the top selling luxury brand in China. Sales topped half a million units in a single year for the first time ever and is on track to hit 600,000 units, a feat that no luxury brand has been able to achieve before.

“It’s not the most important thing. It is not the thing that has guided us over these years, and it will not be the thing that will continue to guide us,” said Speeks of the brand’s leading position in terms of sales volume. “Although, we hope that the great performance of the Chinese market will contribute to our being globally number 1, chasing sales volume for its own sake is not something we are interested in.”

Speeks stressed that the most important thing is making sure that Mercedes-Benz has a solid foundation for future business growth, that it has happy customers, dealers and partners and that it is seen as a premium brand in and around its products.

Hubertus Troska, Member of the Board of Management of Daimler AG, responsible for Greater China, echoed Speeks’ comments and emphasized that for the long-term success of Mercedes-Benz in China, there are many more factors than sales during a single quarter, and that is a lesson he and Speeks have learned while directing the brand’s operations in China over the last five years.

The EQA makes its China debut at Auto Guangzhou 2017.

“It is all about whether we have a good relationship with our dealers. It is about whether customers perceive the image of our brand very positively. It is about whether we are capable of putting the right products into the market and whether they appreciate our products with the right value,” said Troska. “We dare to say that our relationship with dealers is the best in the industry and the products have changed their positions, the value of the brand is better and customers are willing to pay for our products.”

Troska emphasized that local production of the right products will remain a key factor in driving the long-term success of the brand. In fact, he announced at the show that local production of the EQC battery electric SUV, the first series model based on the Concept EQ from Mercedes-Benz’s EQ dedicated electric brand, will go into production at Beijing-Benz Automotive Co., Ltd. (BBAC), Daimler’s joint venture with BAIC Group, in 2019. The model will be powered by battery packs produced locally at BBAC with cells sourced locally, part of a RMB 5 billion investment in next-phase EV and battery manufacturing. BBAC will also begin production of the A-Class sedan in 2018 based on the Concept A Sedan that made its world premiere at the Shanghai Auto Show in April this year, a key segment below the C-Class in the compact car range that now accounts for a fifth of Mercedes-Benz sales in China. The Concept EQA, which had its China debut in Guangzhou, also presented a glimpse of additional models that will be localized, hinted Troska.

“The Chinese new energy vehicle market will develop and there are a lot of government initiatives and desire so we are going all in globally and totally focused on localizing products,” Troska told CBU/CAR. “NEVs are China’s vision and I have no doubt that we need to invest heavily into NEVs.” The fact that Mercedes-Benz is speeding up the pace of EQC localization – in 2019 (the first year the NEV quota requirement is to come into effect) rather than “by 2020” as was announced in Frankfurt – is an obvious reflection of that investment commitment.

The China-exclusive Mercedes-Maybach S680 hits the market.

Troska believes that while customers are not really willing to pay a premium for an electric car because of factors such as range anxiety, residual values and lack of charging infrastructure, regulations are clearly demanding and driving a change in the industry and China will be at the forefront of that development.

“If there is one place in the world that can and will drive this change faster than other countries, it is China,” said Troska. “We as a manufacturer need to make a decision, we need to invest 3-4 years ahead of it, and we are investing into the right direction. We don’t know how fast it will come, but the NEV quota regulations certainly give us a good indication of what the government wants.”

Troska believes that China will enjoy further political stability and economic growth after the recent 19th CPC party congress, and that bodes well for Mercedes-Benz.

“We are up for a very good period. I’m very positive about the Chinese economic development and the automotive market,” said Troska.

“We see a growing Chinese market, the premium segment within that market a little more, and we are going to be a part of that,” added Speeks. “In terms of product selection, we’ve done a lot to diversify the brand to meet customers’ more individual and diverse demands in terms of styling and services.”

Mercedes-Benz is addressing younger segments of its customer base, which averages 35 years old, according to Speeks, through sponsoring events such as e-sports League of Legends and heavy commitment of compact cars.

Mercedes-Benz is also beefing up its presence in online e-commerce platforms that enable an efficient purchasing and servicing experience, as well as quality, offline environments at its dealerships. In fact it plans to upgrade all its dealerships nationwide into a new customer experience ecosystem by 2020.

“The pressure actually comes now. There is a lot of work still to be done in terms of quality of services,” said Speeks. “But we have some ideas and initiatives. We have every confidence in our brand, partners, dealer network and ourselves, and we will continue to grow.”

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