Daimler infuses 2b euros into JV with BAIC
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German vehicle manufacturer Daimler AG is investing 2 billion euros ($2.67 billion) in its local joint venture with China's BAIC Motor Group in Beijing, a funds infusion that will finance construction of the world's largest Daimler production facility by 2015, said company executives.
The German premium vehicle producer plans to more than double its annual capacity to 200,000 units by 2015, said Hubertus Troska, a member of Daimler's management board who is responsible for China.
Troska is also president and chief executive officer of Daimler Greater China.
"China, which has already become the top global automotive market, will for sure become the biggest premium car market from a long-term perspective," said Troska. "If we want to be a successful leader in this important market, we need more locally produced vehicles."
He also said that with the huge additional investment and development, the company aims to increase locally produced vehicles' proportion from the current 50 percent to at least two-thirds in 2015.
The company previously set an annual sales target of 300,000 units in China for that year, a level already achieved by Audi AG and BMW AG.
"We brought aggressive investment to [the joint venture], as we fully understand the importance of the China market. If we are not more successful in China, it will be hard for us to achieve our target of regaining the number one position in the global premium car segment by 2020," said Troska.
He said the investment will go partially into the venture's existing Plant I, which began production in 2006. Some of the financing will cover the cost of an even bigger Plant II for compact vehicles, to be operational by 2015.
"The GLA-Class, a premium product for the fast-growing compact SUV segment, will become the first Mercedes-Benz star to be born in Plant II," said Troska.
Aside from the long-wheelbase E-Class, the first and only Mercedes-Benz tailor-made for a single country, the plant has since 2008 produced the C-Class. Since 2011, it's also turned out the GLK-Class.
The expansion project also encompasses the first Mercedes-Benz engine plant outside Germany.
Production started in May at the facility, with an annual capacity of 250,000 engines. The plant not only provides four and six-cylinder engines for locally produced passenger cars and vans, but also exports key components to Daimler's plants in Germany, said Frank Deiss, president and CEO of the joint venture. The investment will also cover the establishment of a research and development center at the joint venture, the largest in a Daimler joint venture globally.
Equipped with mostly imported testing equipment from Germany, its extensive testing facilities contain a proving ground and the only Mercedes-Benz passenger car prototype shop outside Germany.
The company had disappointing sales in 2012 in its third-largest market, with 196,000 deliveries, representing 1.5 percent year-on-year growth. That put it far behind its major competitors, Audi and BMW.
However, after it integrated the sales divisions through the establishment of Beijing Mercedes-Benz Sales Services Co Ltd in March, sales picked up, with 10 percent annual growth in the following four months.
Though it's slow, "I feel comfortable with the growth pace", said Troska. He said that Mercedes is on track when it comes to two major sales-driven factors - dealer network expansion and new product launches.
The company is opening 75 new dealerships this year in 36 new cities, 45 percent of which will be third or fourth-tier cities. By the end of 2013, there will be 337 dealer outlets in 151 Chinese cities.
