BEIJING -- China-made Mercedes-Benz cars are now good enough to export, according to Ulrich Walker, Chairman and CEO of Daimler Northeast Asia.
"Yes, our cars here are exportable. There is no difference in quality with those made outside China," Walker said. Regular surveys consistently place Daimler's Beijing plant "in the top half" when ranked for quality alongside Mercedes' other factories in the world, he added.
Walker refuted suggestions that Daimler might actually sell its Chinese-made cars overseas. "The market is so big in China we need all our local capacity to supply it," he said.
Walker was speaking at a year-end press briefing in Beijing.
Daimler now produces its C-Class sedans at one of two plants belonging to its Beijing-Benz DaimlerChrysler Automotive Co. (BBDC) subsidiary in the Chinese capital. Earlier this year it halted production of its aging E-Class sedans at the second plant to refit and retool. Next year, production of newer, 2009 E-Class sedans will begin, in a special stretched form that will be unique to China.
Boosting local content
Hard work in implementing Daimler's uncompromising processes has been key in achieving world-class quality here, Walker said. He added that 84 (out of 600-odd) suppliers producing components for Beijing-made Mercedes-Benz cars are now Chinese, and not just international companies producing in China.
"Specifications for any of the components we use are exactly the same anywhere in the world," said Walker, adding that he was aware of Benz's competitors adapting parts to suit local conditions. "We haven't had any quality issues with the new C-Class. It shows that everyone involved in the enabling process did a very good job."
The local content rate for Chinese-made Mercedes now exceeds 45 percent, according to a recent BBDC audit. Walker said this proportion will rise as and when greater scale makes more local sourcing viable.
Local sourcing, he added, had been a contributing factor in BBDC becoming profitable in the second half of last year. This year the unit expects to produce and sell some 18,000 vehicles.
BMW, Audi ahead
In the first eleven months of 2009, sales in China of Mercedes-Benz cars, including imports, increased 68 percent year-on-year to 59,200 units. Yet in spite of this, the brand is still far behind rivals BMW and Audi. Walker acknowledged this lag is due to Daimler's late start in China; its initial reluctance to localize production and then sourcing.
"It's only been 14 to 15 years since Mercedes started making cars outside Germany. I remember in the 1970s. We started making cars outside of Stuttgart for the first time, in Bremen. Even then our head of production said it would be the end of Mercedes," Walker said.
"It's always easy to look back and see these things with the benefit of hindsight," he added, when asked if being so late in localization in China was a mistake for Mercedes.
Until today, perceptions of low quality have made German automakers and tier-one suppliers reluctant to source components from China for production in Germany. They fear content that is made in China will impact negatively on their brand.
Shift from imported cars
Within China meanwhile, the belief that locally-produced luxury cars are inferior to exports is common. Buyers will often remove Chinese lettering from a new purchase in an attempt to fool others into thinking the vehicle is an import.
Yet given Mercedes' advances, Walker says he can foresee a clear trend away from "Made in China" meaning an inferior luxury car.
"This year locally produced cars rose to 28 percent of our total China sales and I can see that rising further to 50 percent," he said.
"Today customers may prefer imports. But in a few years they may prefer to buy a locally produced car."