Daimler to boost Asia sales through new strategic plan

Daimlers Mercedez-Benz intends to present twenty new models in China in the time-frame of 2 years, part of a broader turnaround effort aimed at reversing the brands recent struggles in the worlds biggest auto market.

Daimlers new China chief, Hubertus Troska, and his management team are expected to unveil details of the plan, which also includes expanding manufacturing capacity and the sales network, in Beijing and Chengdu this week.

If the sales target were achieved it would make China the brands biggest market globally, said the sources, who preferred to stay anonymous. Last year Mercedes-Benz sold slightly more than 200,000 cars in China, currently its No. 3 market behind Germany and the United States.

The beginning of the turnaround is the launch of revamped E-class sedan which is expected to be released on Friday at an auto show in the southwestern city of Chengdu. That will be followed by a China launch of the flagship S-class sedan during the third quarter of this year, as well as a more affordable small sport-utility vehicle (SUV) called the GLA next year.

Mercedes-Benz has struggled in China since the start of 2012, when overall demand for luxury cars began slowing down amid an economic situation in the worlds second-largest economy that affected luxury car brands in general.

Mercedes-Benzs sales added just 4% to 206,150 cars, last year. In comparison, sales of Audi cars rose 32% to 407,738 cars, while BMWs volume increased 41% to 313,638 cars, according to consulting firm LMC Automotive. BMW and Audi posted impressive gains, but they were also accused by dealers and analysts of boosting sales through heavy discounts and other costly incentives.

Mercedes-Benz hopes to respond more quickly to changing consumer preferences, which often lead to swings in demand for different types of vehicles, by producing more cars locally. It also would be cheaper for the company to produce there 10 of 7 models offered to the Asian market.

As the economy slows, “even wealthy consumers are likely to shift to more affordable luxury cars, most of which are produced locally in China rather than being imported”, said to CNBC Jeff Chung, a Hong Kong-based auto-sector analyst for Japanese brokerage Daiwa Securities.

However, demand for luxury cars in China is likely to reach 2.7 million vehicles a year by 2020, displacing the United States as the worlds biggest luxury car market.

Daimler shares sank 0.22% so far today while being up more than 40% on a one year basis.