Daimler constructs new $2.4b plant in Beijing

Luxury market races on, but signs of tightening

German automaker Daimler AG began construction on a new joint venture plant in the suburbs of Beijing last month as it moves to catch up with its German counterparts in China's luxury car market.

The new factory for Beijing Benz Automotive Co, Daimler's joint venture with Beijing Automobile Group, will mostly make new-generation compact cars with "the latest concepts in design and innovation", said Ulrich Walker, chairman and CEO of Daimler Northeast Asia.

A Mercedes-Benz Concept Style Coupe (Up) model and a Mercedes-Benz SLS AMG Electric Drive model are displayed on media day at the Paris Mondial de l'Automobile September 27, 2012. The Paris auto show opens its doors to the public from September 29 to October 14. [Photo / Agencies]

The facility will cost about 15 billion yuan ($2.4 billion). The company did not disclose its designed production capacity.

Compact cars made at the plant will "extend the current lineup of the locally produced vehicles", playing "a strategic role in diversifying our portfolio and reaching a younger generation in China", Walker said.

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Domestic media reports said that the new plant is likely to produce Mercedes-Benz A-Class and B-Class cars as well as a compact SUV.

The joint venture now builds the Mercedes-Benz GLK SUV and two sedans - the C-Class and the long-wheelbase E-Class - at an existing plant in Beijing with an annual production capacity of about 100,000 vehicles.

The models have enjoyed "great success", becoming the best-selling Mercedes-Benz cars in China, Walker said.

They accounted for nearly half of the carmaker's total sales nationwide in August. The proportion is expected to "increase further" with the local production of compact cars, he said.

Local production is "important because it ensures us sustainable growth, and allows us to be more flexible and responsive to the local demands", said the CEO.

Beijing Benz has set an ambitious goal to increase its production capacity fivefold to about 500,000 cars by 2015, according to domestic media reports.

Daimler AG's Chief Executive Officer Dieter Zetsche poses next to a Mercedes-Benz SLS AMG Electric Drive model on media day at the Paris Mondial de l'Automobile September 27, 2012. The Paris auto show opens its doors to the public from September 29 to October 14. [Photo / Agencies]

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