Daimler to Invest 2 Billion Euros to Raise China Output

Daimler AG (DAI), the maker of Mercedes-Benz cars, plans to invest 2 billion euros ($2.7 billion) in China building its largest car factory as it seeks to challenge BMW and Audi in the country.

The plant is scheduled for completion as early as 2014 and will help Daimler double China production to more than 200,000 units a year, Hubertus Troska, 53, head of the China business, said in Beijing today. The investments will also go into an engine plant and other auto production facilities.

While Daimler is planning to sell about 300,000 vehicles by the middle of the decade with the introduction of 20 new or upgraded models, Volkswagen AG (VOW)’s Audi reached that milestone in 2011 and Bayerische Motoren Werke AG did so last year. That means Daimler needs to step up expansion in China to meet its goal of becoming the world’s top luxury-car maker by 2020.

“Daimler has begun a catching-up process and is taking the right steps now,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “They didn’t prioritize the market as Volkswagen or BMW did a couple of years ago. Daimler is now correcting this mistake.”

The Stuttgart, Germany-based company last year appointed Troska to be the company’s first management board member to oversee operations in China. Prior to that, Troska ran the Mercedes trucks unit.

Photographer: Nelson Ching/Bloomberg

People examine Daimler AG Mercedes-Benz vehicles at the company's stand during the auto show in Beijing. Close

People examine Daimler AG Mercedes-Benz vehicles at the company's stand during the auto show in Beijing.

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Photographer: Nelson Ching/Bloomberg

People examine Daimler AG Mercedes-Benz vehicles at the company's stand during the auto show in Beijing.

China Improvement

Since then, he merged the company’s two distribution arms in China and set up a support unit to coordinate marketing, sales and training initiatives in the country.

China is set to become Daimler’s largest market as early as 2015, Troska said.

“If we’re not more successful in China, our goal of global position number one will be very difficult to achieve,” Troska said. “There’s a recognition that we need to improve our performance in China vis-a-vis some of our competitors.”

The automaker, which has a target of selling more than 1.4 million cars globally this year, will introduce its revamped E-class sedan later this week and the new S-class sedan later this year in China, which accounts for more than half of worldwide sales of the model.

On Daimler’s first Chinese engine plant, which will begin production in the fourth quarter, the company expects to begin shipping some parts to Germany from next year, Troska said. The quality of China-made components will be as good as if they were manufactured in Germany, he said.

Jimmy Cao, a BMW China spokesman, said that currently the company’s production at its China plants is for the Chinese market. Audi China spokesman Martin Kuehl said the carmaker doesn’t export from China.

To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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