• Thu
  • Aug 28, 2014
  • Updated: 12:50pm
BusinessChina Business
LUXURY CARS

Mercedes less wary about sharing know-how in renewed China push

German luxury carmaker ramps up mainland production to regain ground lost to BMW, Audi

PUBLISHED : Thursday, 29 May, 2014, 1:40pm
UPDATED : Friday, 30 May, 2014, 1:39am

Battling to catch up with German rivals in China, luxury carmaker Daimler is shifting gears, giving authorities there unprecedented access to new Mercedes models and even tailoring engines destined for its home market to Chinese regulations.

For years, Daimler has lagged Audi and BMW in the world's biggest car market. Last year, Mercedes-Benz, the company's premier luxury brand, sold 228,000 cars there, compared with nearly 492,000 for Audi and more than 362,000 for BMW. The reasons for this are varied.

For years, Daimler harboured doubts over the sustainability of growth in China. German labour union resistance to shifting production from Daimler's main factory in Sindelfingen, near Stuttgart, also played a role.

Another key factor has been Daimler's more cautious approach to sharing technological know-how owing to fears of piracy. This prevented the company from deepening its footprint in China, where foreign carmakers are required to work with local companies, at a time when its rivals were going all-in.

Now this is changing - in part because the Chinese authorities have taken steps to crack down on copyright violations, but also because Daimler executives have realised there is no alternative to closer cooperation if they are to make up lost ground in a market that continues to post impressive growth rates.

This year, Daimler is starting production of its newest C-Class in China as well as Germany, a significant change for a manufacturer that had previously delayed local Chinese production of new models by months.

Beijing Benz Automotive, the joint venture Daimler runs with Beijing Automotive, is also constructing a new production line for the compact GLA model.

For Beijing Benz to get permission to build both cars locally, they need to undergo a 160,000km emission test and a regulation test with Chinese authorities. These can take up to a year. As part of this process, Mercedes is allowing Chinese officials to take samples of components and make detailed measurements of its newest cars.

"To put it bluntly, we are transferring know-how," said Rene Reif, head of engineering and manufacturing at Beijing Benz.

To tap China's potential more effectively, Daimler recently moved its Mercedes-Benz Advanced Design Centre from Japan to Beijing.

Its main research and development activities for Mercedes remain in Germany, but China's influence is increasing, even on Daimler's home turf.

For example, the AMG GT, a sports coupe being developed in Germany, is having its engine size reduced to avoid China's progressive taxation thresholds.

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