GERMANY: Daimler announces China expansion
- Framework agreement for EUR2bn additional investment signed with JV partner BAIC
- New engine plant and production of several models of new compact cars and the GLK
- Foundation of an R&D centre
The signing ceremony was held in Berlin in the presence of German Chancellor Dr. Angela Merkel and the Chinese Prime Minister Wen Jiabao. Attending were Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, Ulrich Walker, Chairman and CEO of Daimler Northeast Asia, and Xu Heyi, Chairman of BAIC. (Left to right: Xu, Prime Minister Wen, Chancellor Merkel, Walker, Zetsche)
Daimler and its Chinese partner Beijing Automotive Industry Corporation (BAIC) have signed a strategic framework agreement to further expand their cooperation in China.
The signing ceremony was held in Berlin in the presence of German Chancellor Angela Merkel and the Chinese Prime Minister Wen Jiabao.
Daimler said that about EUR2bn will be invested in the Joint Venture Beijing Benz Automotive Co, Ltd. (BBAC).
Daimler CEO Dieter Zetsche said: “With this framework agreement, we are laying the essential strategic foundations for our long-term and significant participation in the growth of the key market China. The projects agreed upon are further central elements of our China strategy for the sustainable development of our business. As early as 2020, at least one in five premium compact cars is expected to be sold in China. In the light of this enormous growth potential, we are resolutely switching to attack mode with the local production of our new compacts.”
The agreement includes the following projects:
- Local passenger car production for the Chinese market will be expanded to include the GLK compact SUV as of 2011 as well as three models of the new generation of Mercedes-Benz premium compact cars. The first of these models will be produced from 2013; the two others will follow step by step.
- Current production capacities of about 80,000 units for the C-Class and the E-Class long version will be further expanded in line with market demand.
- From 2013, a new engine plant will produce 4-cylinder gasoline engines, which will be used in locally produced Mercedes-Benz passenger cars and vans. The planned technical capacity of this engine plant will be expanded to 250,000 units, of which up to 100,000 units per year will initially be utilised.
- A new R&D centre will be established, which will mainly focus on vehicle testing and adaptation as well as R&D activities with suppliers.
The investment is part of the overall investment programme, according to which Daimler and its partners will invest a total of about EUR3bn in China in the next few years.
Daimler said in a statement that it believes there is 'enormous growth potential in the premium compact segment' in China. It estimates that in 2010 there were 770,000 sales in that segment which expects to grow to more than 2m units annually by 2020. This would boost China’s share of global premium compact sales to more than 20% from the current 12% and make it the largest market for premium compacts worldwide, Daimler said.
“We laid the foundation of our success in the premium compact segment in China when we successfully introduced the current B-Class to the market. Responding to the immense growth of demand, we lately also brought the current A-Class to China. Together with the C-Class, the GLK, and the smart, the A-Class and the B-Class constitute the ‘Young Mercedes’ product family in China, which today accounts for about 40 percent of our sales,” said Ulrich Walker, Chairman and CEO of Daimler Northeast Asia.
“With these projects now agreed upon — especially those related to our passenger cars business — we are forging ahead with our clear strategy for profitable growth.”
Xu Heyi, Chairman BAIC said: “BAIC and Daimler are long-term strategic partners. These projects are important steps of the two partners to expand local production in China, and will become a benchmark of Sino-German economic cooperation.”
About Daimler Northeast Asia
Daimler Northeast Asia, located in Beijing, includes Mercedes-Benz (China) Ltd, Mercedes-Benz Auto Finance Ltd, Daimler Northeast Asia Parts Trading & Services Co., Ltd., the joint ventures Beijing Benz Automotive Co., Ltd. (BBAC), Fujian Daimler Automotive (FJDA), Shenzhen BYD Daimler New Technology Co. Ltd., as well as sales organizations in Hong Kong, Korea and Taiwan.
Local production of Mercedes-Benz passenger cars began in 2006. This was at BBAC, a 50/50 joint venture, with the first model being the predecessor of the current E-Class. In spring 2008, local production of the C-Class commenced. In May 2010, BBAC introduced the current E-Class in special long-wheelbase form especially customized to meet the requirements of the Chinese market.
On the sales side, Mercedes-Benz passenger cars is represented in China with a comprehensive product portfolio. In 2010, more than 148,000 vehicles were sold, surpassing 2009 sales by 112 percent. From January to the end of May 2011, 75,896 vehicles were sold. This was an increase of 62 percent compared to the corresponding period of 2010. The sales network included more than 160 dealerships in about 80 cities and will be expanded by more than 30 new dealerships in 2011. The brand is continuing to strengthen its presence, especially outside tier-1 metropolitan areas.
Other activities in China include Fujian Daimler Automotive Ltd., a JV which started production of Mercedes-Benz vans in April 2010. Also in 2010, Daimler expanded its industrial activities with the signing of a joint venture agreement with the Chinese truck manufacturer Foton Motor to produce medium and heavy-duty trucks. Since 2009, Daimler Financial Services has offered vehicle leasing through Mercedes-Benz Auto Finance China. In addition, Daimler and BYD maintain Shenzhen BYD Daimler New Technology Co. Ltd. This is a JV for the development of an electric vehicle for the Chinese market. It was officially approved in March 2011.