Mercedes allows Chinese to peek under hood in Asia growth push

Wed May 28, 2014 10:34pm EDT
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By Edward Taylor

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

For years, Daimler has lagged Audi (VOWG_p.DE: Quote) and BMW (BMWG.DE: Quote) in the world's biggest car market. Last year, Mercedes-Benz, the company's premier luxury brand, sold 228,000 cars there, compared to nearly 492,000 for Audi and over 362,000 for BMW.

The reasons for this are varied.

For years, Daimler harbored doubts over the sustainability of growth in China. German labor union resistance to shifting production out of Daimler's main factory in Sindelfingen also played a role.

Another key factor has been Daimler's more cautious approach to sharing technological know-how due to fears of piracy. This prevented the company from deepening its footprint in China, where foreign automakers 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 have taken steps to crack down on copyright violations, but also because Daimler executives have realized 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 step-change for a manufacturer that had previously delayed local Chinese production of new models by months.

Beijing Benz Automotive Co. (BBAC), the joint venture company Daimler runs with Chinese partner Beijing Automotive Group Co., is also constructing a new production line for the compact GLA model.   Continued...

Hubertus Troska, Daimler board member responsible for greater China, attends a world premiere ceremony for the new Mercedes Benz C-Class Long Wheelbase at Auto China 2014 in Beijing, in this April 20, 2014 file picture. REUTERS/Jason Lee/Files