Mercedes-Benz could become the first luxury carmaker to launch new models in China before rolling them out in Europe and the U.S. after strengthening its local r&d operations in a bid to narrow the gap with Audi and BMW in the world’s largest car market. Measured by global car sales, Mercedes is the smallest of the three dominant German premium brands largely because of its weaker position in China, where it had suffered in the past from having two competing sales organizations, a much thinner dealer network and a lack of locally built compact SUVs.
Introducing future models in China first would highlight how much priorities have changed for Daimler over the past two years, when it was forced to overhaul its stagnating business there in late 2012 after witnessing its two German competitors divide up market gains for themselves. “In the past China wasn’t part of the first roll out phase [for new products], which is perhaps a reason why we were a little bit behind,” Mercedes development chief Thomas Weber told Automotive News Europe during the opening of its new advanced design studio in the Wang Jing district of Beijing. “Why not be first at some point? That’s the trend in my view and it could not happen without a massive investment in r&d,” he said.
Over the last couple of years, Daimler has appointed a new board-level executive responsible solely for China, unified local sales and distribution, constructed a car engine plant (its first one outside of Germany), added 179 new dealerships and bought a 12 percent stake in joint venture partner BAIC Motor for 627 million euros.
Mercedes will begin building the GLA compact SUV early this year in addition to its midsize GLK crossover and long wheelbase versions of the E- and C-class sedans. More compact cars will roll off the assembly line at its joint venture plant in Beijing following a 1 billion euro investment by Daimler and BAIC. Ultimately Mercedes aims to sell significantly more than 300,000 cars in China in 2015, two-thirds of which it hopes to build locally.
Rising local content
Weber wouldn’t say which major model Daimler might first debut in China, emphasizing that deliberations are at a very early stage. Such a move would require a high level of local content, a larger pool of qualified suppliers in China and more testing facilities, which is where his team comes in. “At the moment no one is doing it. I explicitly will not rule out launching new models and derivatives first in what will soon be the most important market, but in order to do so, a few conditions have to be met.”
Its recent decision to invest 112 million euros to expand its Beijing research facilities is closely linked to these plans, since it needs the necessary proving grounds, test benches and vetted suppliers in place to guarantee a smooth launch. This includes two r&d departments based at its factory in Yi Zhuang on the outskirts of Beijing that together adapt vehicles and engines to Chinese needs, ensure quality, and establish ties to local suppliers -- all crucial when launching new models. Mercedes, which has over 280 suppliers based in China, aims to increase local content to about 80 percent to 90 percent from the current 60 percent to 70 percent.