Daimler and BAIC to spend 1 billion euros to raise China output

Article by Christian A., on April 1, 2014

Daimler and Beijing Automotive Group will invest EUR1 billion ($1.37 billion) to more than double Mercedes-Benz production capacity at their joint-venture site to keep up with increasing demand. The Beijing site produces the C-class, E-class sedans, GLK SUV and will add output of the GLA compact SUV next year. The expansion will allow the site to build over 200,000 vehicles in 2015.

The site could be further expanded if demand continues to surge. Mercedes posted a 57-percent rise in deliveries in China in the first two months of the year. The EUR1-billion investment is part of a EUR4 billion spending project in China that will also include broadening of the carmaker’s model lineup. Daimler and BAIC will also hike engine production at their Beijing site from 250,000 units as vehicle sales rise.

Daimler chief executive Dieter Zetsche said in a statement that the Chinese auto market continues to have great potential, in which the company wants to participate in. China is vital to Zetsche's goal for Mercedes to top BMW and Audi and become the best-selling luxury car brand in the world by 2020.

In the past, Mercedes’ performance in China was hindered by separate sales organizations for imported and locally made cars, leading to price cuts as the two units competed with one another. In 2012 Daimler reorganized its China operations and merging the sales units, while naming Hubertus Troska to Daimler's management board as chief for the country.

Daimler also increased the number of dealerships in China and opened its first engine site Germany in Beijing. In November 2013, Daimler completed the purchase of a 12-percent stake in the BAIC Motor for EUR625 million. Zetsche plans to achieve his goal by rolling out 30 new models through 2020, a dozen of which having no predecessor. Mercedes posted a 17-percent surge in global sales in the first two months of 2014, outgrowing BMW (6.6 percent) and Audi (9.3 percent). [source: Reuters]

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