(Updates with plant strategy in 13th paragraph.)
Dec. 12 (Bloomberg) -- Daimler AG, the third-biggest maker of luxury cars, is working to end rebates on its Mercedes-Benz vehicles in China, including pricing of its C- and E-Class sedans, while matching the premium segment’s growth next year.
“We’re not aiming for volume at any price,” Hubertus Troska, head of Daimler’s operations in China, said at a press briefing late yesterday near the manufacturer’s headquarters in Stuttgart, Germany. “We’re first tackling the positioning of the E- and C-Class. The success of Mercedes-Benz in China doesn’t depend on the sales volume of 2014.”
Troska was appointed a year ago to fix Daimler’s Chinese business, which was hampered by separate distribution structures for locally built and imported Mercedes-Benz cars. Daimler has merged the two sales operations and tightened bonds with partner Beijing Automotive Group Co. by buying a 12 percent stake in the Chinese company’s BAIC Motor carmaking unit.
Improvement in China is crucial for Daimler Chief Executive Officer Dieter Zetsche’s goal to surpass Bayerische Motoren Werke AG and Audi AG in global sales of luxury cars and sport- utility vehicles by the end of the decade.
Troska said he’s forecasting the Chinese car market, particularly the premium segment, will grow more than 10 percent next year, and “we want to grab our share of that.”
Mercedes-Benz’s Chinese sales this year are recovering after a plunge in February of 47 percent. The brand’s 11-month deliveries in the country rose 9.7 percent from a year earlier to 194,500 cars and sport-utility vehicles. That still lags behind competitors. Worldwide luxury-car industry leader BMW’s Chinese sales in the period rose 20 percent to 328,800 vehicles, while deliveries at Volkswagen AG’s Audi unit also rose 20 percent to 443,700 in the market including Hong Kong.
A revamped E-Class and a new version of the flagship S- Class have helped revive demand. Troska, who was previously head of the Mercedes-Benz heavy-truck division, reiterated a target to increase annual deliveries in China to 300,000 by 2015, with locally produced vehicles accounting for two-thirds of the figure.
Before the merger of the sales organizations in March, the separate structures led to internal competition and price cuts that lowered profitability as well as resale values. In the end, Chinese customers could get up to 18 percent discounts on an E- Class, Troska said, and the cars were cheaper than comparable models from Audi and BMW.
“We will definitively not repeat these mistakes,” Troska said. “The old conflicts are over. The dealers follow us and the confidence is extremely high.”
A sales boost will probably accelerate in early 2015 after the new mid-sized C-Class, the company’s best-selling model, starts local production in the second half of 2014 and Mercedes- Benz begins building the new GLA compact SUV in Beijing. The carmaker’s strategy includes bringing out 20 new or revamped models in the country by 2015, including seven introduced this year.
“In the past, we didn’t give China the importance that was needed and that it would have deserved,” Troska said. “We’re changing this now.”
Daimler is likely to meet its goal of adding 75 dealerships in China this year, Troska said. The company has also said it plans on 50 new outlets annually in 2014 and 2015.
Mercedes-Benz has no plans to open a car plant outside Beijing, Troska said. The company has enough space at the current BAIC joint-venture factory in the Chinese capital to add models, said the manager, who runs all Daimler operations in China, including heavy trucks and vans. Vehicles built at the site include the current C-Class version as well as the GLK SUV and a long-wheelbase variant of the E-Class.
The manufacturer said in August that it will invest 2 billion euros ($2.75 billion) by 2015 to double its annual Chinese production capacity to more than 200,000 vehicles. Mercedes-Benz opened its first engine plant outside Germany in China last month.
“The better I understand China, the better I can lead the company and say where to invest,” Troska said.
Compact models also need to be built in China for Mercedes to remain competitive in the segment there, Troska said. There’s “huge potential” for the GLA in the country, he said.
--Editors: Tom Lavell, David Risser