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Daimler's Mercedes-Benz sees double-digit growth in China market

By Norihiko Shirouzu

CHENGDU, China (Reuters) - Daimler AG's Mercedes-Benz expects to see growth of up to 15 percent in China's luxury car segment this year, a senior executive said, and is trying to grab a bigger share of that market by expanding into the inland-west and smaller cities.

The company plans to open 75 new dealer outlets this year, nearly half in third- and fourth-tier cities, said China sales head Nicholas Speeks, as part of a broader turnaround plan to reverse its recent struggles in the world's biggest auto market.

"We are a little bit lagging behind our principal competitors in terms of outlets opening," Speeks told reporters at a news briefing to outline the German brand's strategy at the Chengdu auto show on Friday.

"In the past we have been concentrating on Beijing, Shanghai (and other major markets along China's coast). We recognize one of our shortcomings is the fact that we need to expand our dealer network."

The network expansion is a key component of Daimler's strategic plan to invest 2 billion euros ($2.67 billion) in China over the next two years.

It aims to boost sales of Mercedes-Benz cars by a third to more than 300,000 cars a year by 2015, from this year's forecast sales of 230,000 cars.

If achieved, the target would make China Mercedes-Benz's biggest market globally. Currently, China is the brand's No. 3 market behind Germany and the United States.

Speeks said China's economy remained "fairly healthy", despite a slowdown in growth.

China's overall car market was expected to grow about 10 percent, year-on-year, this year, he said. "I think the premium car market will exceed that. It will be solid double-digit growth this year."

Asked to define that, he said: "13-15 percent growth - somewhere in that ball park."

NEW MODELS

The sale network plan, calls for increasing the number of Mercedes-Benz dealer retail outlets overall to 300 covering more than 150 cities by the end of this year, compared with 285 the brand operates currently.

In addition to Mercedes-Benz stores, the German auto maker currently has about 90 Smart dealer-shops.

One of the 20 new or upgraded products Mercedes-Benz plans to launch in China through 2015 is the E-class sedan specially redesigned for China, which the company is officially launching at the auto show in Chengdu, southwest China.

On Tuesday, Daimler's new China chief, Hubertus Troska, told reporters in Beijing about the planned new product blitz and noted Mercedes-Benz was going to expand its manufacturing capacity in Beijing, as part of an effort to make its cars more affordable and expand their appeal in China amid a slowdown in economic growth.

In order to be the world's No. 1 luxury auto brand by volume, which is Daimler's objective for Mercedes-Benz, Troska said the brand needed to improve its performance in China.

"If we are not more successful in China, then our goal of global position No. 1 will be difficult to achieve," the German executive said in Beijing on Tuesday.

"There is a recognition that we need to improve our performance in China vis-à-vis some of our competitors."

One factor behind Mercedes-Benz's struggle in China was a lack of market coverage.

"If you compare us to our competitors, they cover more cities. They have more outlets," Troska said. "The expansion of dealer network and bringing more new products to market are going to drive our growth momentum."

(Editing by Alex Richardson)

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