China speed bump for Mercedes
Sold 138,000 cars in the first half of this year, compared with 225,000 at BMW and 269,000 at Audi
When Daimler decided to post a board member to Beijing for the first time, it did so with a simple mandate: repair long- running operational problems at the German company’s Mercedes-Benz unit in China and close the gap with BMW and Volkswagen’s Audi.
That task, however, has been complicated by an investigation into motor pricing practices by the National Development and Reform Commission, one of the three government agencies that enforces China’s 2008 anti- monopoly law. The probe has ensnared Mercedes, BMW, and market leader Audi to varying degrees, and injected a new risk factor into the sales battle between the big three luxury automakers.
While these three German companies dominate luxury sedan sales in theworld’s largest carmarket with a combined segment share of 80 per cent, Mercedes has been the laggard. Huberts Troska, who took over as chairman and chief executive of Daimler’s China operations last year, and Nicholas Speeks, head of its Mercedes unit in the country, set about unifying a fragmented dealership structure and investing heavily in its manufacturing joint venture with state- owned carmaker BAIC Motor.
Mercedes sold 138,000 cars in China in the first half of this year, comparedwith 225,000 at BMW and 269,000 at Audi. But Mercedes’ sales are accelerating rapidly and the company seems on target to reach its goal of 300,000 units by 2015.
Spare parts pricing
Executives are still waiting for the results of the NDRC’s investigation but signals so far suggest Mercedes and Audi may be in for a rougher ride than BMW. At issue is the degree to which the three carmakers have been involved in dealers’ pricing of spare parts and vehicles.
Mercedes said one of its joint venture’s sales offices was raided by NDRC officials.
In an attempt to mollify the NDRC, Mercedes announced large price cuts on more than 10,000 spare parts. BMW, which has managed to keep a much lower profile throughout the investigation, volunteered cuts on only about 2,000 components, having lowered its prices more aggressively over recent years. At a media briefing earlier this year Speeks said the carmaker was “not able and not inclined to dictate what price the dealer and the customer agree. We have anti- monopoly and antitrust laws in [ China] as we do in other countries.”