Beijing Benz shipping its locally made E-Class to South America

BEIJING - After big expansion in manufacturing capacity and product portfolios in China, foreign carmakers are now looking beyond the populous market for new growth opportunities.

Ulrich Walker (right), chairman and CEO of Daimler Northeast Asia, and Xu Heyi, chairman of the joint venture and Beijing Automobile Group, at a ceremony on Dec 20 to mark the South American shipments. [Photo/China Daily]

Beijing Benz Automobile Co, the joint venture between Beijing Automobile Group and Mercedes-Benz, last week handed over the first of 35 long-wheelbase E-Class sedans to Daimler AG, parent of the German premium carmaker, for sale in South America.

The extended wheelbase E-Class sedan - tailored for Chinese customers who prefer a roomy back seat - is built nowhere else in the world except the joint venture plant in Beijing. The model first hit the market in July last year.

Ulrich Walker, chairman and CEO of Daimler Northeast Asia, said that the company now sees that the stretched E-Class is appreciated not only in China but also is winning the favor of new customers in South America.

He added that the company will take full advantage of the knowledge and capacity in producing the lengthened E-Class to satisfy the demand in specific markets that can not be served by its operations elsewhere.

According to market research firm JD Power-LMC, Mercedes-Benz has plants in Brazil and Argentina assembling mostly commercial vehicles like the Sprinter van. It sold about 15,000 passenger vehicles in South America last year, including more than 1,000 E-Class sedans.

Likely a dark horse

Xu Heyi, chairman of Beijing Automobile Group and the joint venture, said the exports prove Beijing Benz has the competence to join in international competition and the long-wheelbase E-Class it produces is expected to be a dark horse in the global market.

The joint venture, which also makes the C-Class sedan and the GLK SUV, is currently capable of producing 100,000 cars a year. It is building new facilities that could boost total annual output at the joint venture to 400,000 units or even more in 2015, the company said earlier this year.

Mercedes-Benz will bring three other compact models to China for local production starting in 2013, according to an agreement inked by both partners this year. Media reports speculate that the models could be the A-Class, B-Class and the BLK.

Cai Suping, senior executive vice-president of Beijing Benz, said the company will explore the feasibility of exporting more models based on market reaction. Every model produced at the joint venture could possibly join the competition in global markets in the future, he said.

Less than three weeks before, BMW held a ceremony in northeastern city Shenyang, home to its joint venture with China's Brilliance Auto, to announce the first export of its long-wheelbase 5 Series sedans. The company didn't disclose the destination, saying it could be Middle East, Asia or some other countries.

BMW now builds its 3 Series and 5 Series in China. Its annual output is expected to reach 300,000 units when a new plant, scheduled to be ready next year, goes into full operation.

Allocation of resources

Analysts said it is a reasonable move for foreign carmakers to use Chinese production facilities to meet demand in both China and other markets.

"It is natural for multinational companies to allocate their resources worldwide for reasons like logistics," said Zhong Shi, an independent auto analyst in Beijing. "And it would be a way to kill two birds with one stone if the long-wheelbase cars tailored for China are popular with consumers in other emerging countries," he said.

Jenny Gu, a senior analyst at market research firm JD Power-LMC, said that since Mercedes-Benz and BMW have invested heavily in China to boost annual output, they could make the best use of the new capacity through exports.

The companies could reduce risks as well if the Chinese market slows, she said.

Some non-luxury foreign carmakers began exporting their China-made models much earlier.

Honda's joint venture with Guangzhou Automobile Group started selling the China-made Fit in Europe five years ago. A recent report of New York Times said that the company now is shipping the model to Canada.

General Motor's partnership with SAIC Motor began shipments of its Chevrolet New Sail to Chile in October last year.

French carmaker PSA Peugeot Citroen's local joint venture with Dongfeng Motor Corp also exported some Peugeot 408 sedans to Egypt earlier this year.