Daimler and Beijing Automobile Group build US$2.4 billion factory

Ulrich Walker, chairman and CEO of Daimler Northeast Asia, said the joint venture between German automaker Daimier AG and Beijing Automobile Group has begun constructing a new factory for Beijing Benz Automotive Co. to produce new-generation compact cars equipped with “the latest concepts in design and innovation.”
The facility will be built at a cost of about CNY15 billion (US$2.4 billion); the intended production capacity has not been disclosed.
 
According to media reports, the new plant is likely to build Mercedes-Benz A-Class and B-Class cars, as well as compact SUV. The joint venture is now producing the Mercedes-Benz GLK SUV, the C-Class and the long-wheelbase E-Class sedans at the plant in Beijing, which has a production capacity of about 100,000 vehicles annually. Walker said the models are becoming the best-selling Mercedes-Benz cars in China, accounting for almost half of the carmaker’s total sales nationwide in August. With the local production of compact cars, this proportion is expected to increase further, and by introducing compact cars to their line, the automaker will be able to diversify its portfolio and reach a younger generation in China. Local production allows for more flexibility in meeting the demands of the local market, and it ensures sustainable growth. Beijing Benz has set a production goal of about 500,000 cars by 2015.
An engine plant is under construction by the joint venture, the first Mercedes-Benz engine plant outside Germany. The plant, designed to have a production capacity of 250,000 engines annually, will produce three types of gasoline engines and is scheduled to start operations next year.
 
Sale of Mercedes-Benz China in the first eight months of the year increased by 6% to about 127,700 vehicles, trailing behind its rivals Audi and BMW, which posted a year-on-year growth of more than 30% in the same period. Audi sold more than 261,000 units in the first eight months, while BMW sold about 192,800 units. Both are also increasing local production capacity in China, which has become the largest market for them. LMC Automotive, a market research firm, predicts that sales of luxury cars in China will increase by 19% this year to more than 1.1 million units. The market forecast is that double-digit growth will continue for the next five or six years. However, the economic slowdown and increasing competition is building up pressure, so that more luxury car dealers are offering significant discounts this year to drive sales. According to media reports, Daimler has revised its profit forecast downward on its Mercedes-Benz car units due to the prevailing lower profitability in China and the continuing deterioration of market conditions in Europe.
October 8, 2012