Daimler's Mercedes-Benz set to beef up sales network in China

Reuters

CHENGDU, China, Aug 30 (Reuters) - Daimler AG's Mercedes-Benz will try to reach deeper into China's inland-west region and small "lower-tier" cities for growth as part of a broader turnaround plan for the world's biggest auto market, according to people familiar with the matter.

The initiative, due to be detailed by top Mercedes-Benz China executives at the Chengdu auto show on Friday, is a key component of Daimler's strategic plan to invest 2 billion euros ($2.67 billion) in China over the next two years.

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The German brand 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.

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

This year, Mercedes-Benz is aiming to add a total of 75 stores, about 45 percent of them sited in lower, third-tier and fourth-tier cities, the individuals said.

In addition to Mercedes-Benz stores, the German auto maker currently has about 90 Smart dealer-shops. It was not clear how many additional Smart outlets Mercedes-Benz plans to add by year's end.

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 due to officially launch 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-��-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."