[Stay on top of transportation news: Get TTNews in your inbox.]
Mercedes CEO says China price pressure is here to stay
Ola Källenius says fierce competition from Chinese brands has become a new reality
Mercedes-Benz Group CEO Ola Källenius. (Alex Kraus/Bloomberg)
Key Takeaways:
- Mercedes-Benz CEO Ola Källenius said in Finland that intense price competition in China’s auto market will likely persist for years.
- Chinese brands led by BYD dominate EVs and are targeting luxury buyers, contributing to Mercedes’ 30% second-quarter China sales decline and industry restructuring.
- Mercedes opens German orders for the redesigned GLA on July 30 as it seeks to rebuild sales toward roughly 2 million vehicles annually.
Mercedes-Benz Group AG CEO Ola Källenius expects the fierce pricing competition in the Chinese car market to stick around for years to come.
Chinese brands are spending an “enormous amount of money” to break into the country’s luxury-auto segment to compete with Mercedes models such as the S-Class and the G-Wagon, the CEO said at an event near Helsinki, Finland.
“That competitive intensity in China — I don’t believe it’s going to go away anytime soon,” Källenius told reporters. “It’s a new reality.”
RELATED: Chinese ownership threshold threatens Mercedes sales path
Chinese manufacturers led by BYD Co. are dominating on electric vehicles in the world’s biggest auto market, feeding a near-ruinous pricing competition with quick successive launches of new models. That’s led to sales declines for Mercedes but also Porsche AG, BMW AG and Volkswagen AG’s Audi, which are restructuring to become leaner and more efficient.
Meanwhile, China’s luxury-car market has shrunk due to a protracted property crisis that’s weighed on big-ticket purchasing. In the top-end segment that also includes Mercedes’ AMG performance models, the German brand still “dominates,” Källenius said.
The CEO made the trip to Finland to show off the new GLA, a compact sport utility vehicle meant to bolster sales near the bottom end of the company’s lineup.
Mercedes is offering the SUV in several drivetrains, including a fully electric one with as much as 657 kilometers (408 miles) of range. German orders open July 30, with prices starting around 48,600 euros ($55,300).
The launch is a test of whether Mercedes can rebuild sales without undermining profitability. The manufacturer needs models such as the GLA to replenish its customer base as demand weakens in China and its focus on higher-priced vehicles leaves it more exposed to a global luxury downturn. Mercedes is targeting a return to annual car sales of about 2 million in the medium term, compared with roughly 1.8 million last year.
When reporting earnings this week, Mercedes pledged more cost cuts, particularly in Germany, to underpin returns after a 30% second-quarter sales drop in China. That decline wasn’t much bigger than the slump in the country’s overall market, Källenius said in Finland. Mercedes is managing pricing in China “as carefully and financially sound as we can.”
The redesigned GLA is aimed mainly at customers in Europe, where demand for EVs has been rising. The SUV has a lower silhouette and longer wheelbase than its predecessor, creating more interior space while giving the model a sportier stance.
The car “looks like a predator,” Källenius said.
