Daimler is preparing to launch production of the Mercedes-Benz GLK at its Chinese assembly plant.
When Daimler AG’s shareholders quizzed Deiter Zetsche’s plans for the future he basically summed it up with one word – China.
The booming Asian nation now dominates Daimler’s strategic thinking, which is why it’s no surprise that Zetsche will travel to Shanghai this week to unveil the next version of the Mercedes-Benz A-Class at the Shanghai Auto Show. (With a second prototype getting a follow-up introduction days later at the New York Auto Show.)
In addition, Daimler plans to double the size its new joint-venture plant in Beijing to build 300,000 vehicles annually by 2014-2015, mostly for China’s internal market — though some of the multiple models slated for assembly at the plant could be exported.
“The momentum of that market is tremendous. As recently as 2008, the ‘Middle Empire’ was number seven on the list of Mercedes-Benz most important market,” Zetsche told Daimler’s shareholders. Now, “When someone in the auto industry mentions growth, within three sentences the talk will likely be about China.”
Significantly, Daimler CEO Dieter Zetsche will attend the Shanghai, rather than NY, auto show..
In 2009, the Middle Kingdom had already climbed to fourth on Mercedes’ list, and in 2010 it was number three after the luxury maker’s home market, which still commands a huge amount of institutional and emotional loyalty, and the huge U.S. market where Mercedes commands a loyal following. The U.S. remains the world’s largest luxury market, but for how long is uncertain.
Mercedes-Benz sales in China more than doubled to 160,000 units last year, from only 60,000 in 2010, and are set to grow again this year.
“Confirmed pessimists are already asking whether our industry could end up being too dependent on the China market. However, we should remember that China’s economic advance has ended our previous long-term dependence on the triad – in other words , our traditional markets in North America, Western Europe and Japan,” said Zetsche with the same fervor he once used to hawk Jeeps and Chryslers in the U.S.
“During the recent economic crisis, China was an island of growth and so far it has been the engine of growth during the upswing. China’s economic development is not a threat to our goal of balanced growth,” Zetsche told shareholders. “On the contrary it is creating opportunities to help us achieve it,” he said.
“Our planning focuses on posting significant growth inside as well as outside the triad in the years up to 2015. Accordingly, in China we are already taking the next steps by expanding our sales network. This year alone we will open around 30 new dealerships there.
This year production of Mercedes’ compact GLK SUV will begin in the maker’s plant in Beijing and production of additional models is in the planning stages as the plant doubles in size, he added.
Following the Daimler brand’s expansion of production capacity Mercedes has now committed to also build a passenger car engine plant in China – its first outside of Germany. The engine plant’s annual production capacity will be 100,000 powerplants with production expected to begin at the end of 2013, Zetsche said.
The Daimler CEO said the company is also pushing into the huge Chinese truck market. Mercedes-Benz Trucks are now well established there, he said.
Despite Zetsche’s upbeat report on the Daimler’s prospects in China, not all the shareholders who showed up in Berlin for the company’s annual meeting were buying into that rosy assessment of the unfolding situation in China. Several asked the CEO pointed question about the stability of the Chinese market and whether Daimler’s intellectual property was safe.
Zetsche basically admitted designs for Daimler trucks have been copied in the past. However, as far as he was concerned there was no point in fighting over “20 year old truck designs,” he said.
Instead, Zetsche said he preferred to have faith that a new China was emerging that would respect Daimler and Mercedes Benz intellectual property. “I do believe, with all my heart, they are going to respect our property rights,” he said.
In any case, Daimler and Mercedes-Benz have now settled into China to stay for the long haul, which is also is one of the subtext’s of Zetsche’s trip to Shanghai this week.