Chinesepod - Beijing Benz may break even in '07

BIZCHINA / From the Industry

Beijing Benz may break even in '07

By Gong Zhengzheng (China Daily)
Updated: 2007-04-26 06:58

German-US carmaker DaimlerChrysler AG's joint venture with Beijing
Automotive Industry Corp expects to break even this year, fueled by
growing new product sales.

Gunter Butschek, president and chief executive officer of the 50-50
partnership, said in an interview with China Daily that the company has
the potential to break even as it launches new models.

The venture, named Beijing Benz-DaimlerChrysler Automotive Co, has been
in the red for the past two years as stiff market competition and high
fuel prices caused sluggish sales of its sport utility vehicles (SUVs).

The company was created in August 2005 as an enlarged body of Chrysler's
joint venture with Beijing Automotive, which was set up in 1983 as the
first Sino-foreign vehicle venture. The Chrysler venture produced SUVs
only.

As part of its turnaround plan, Beijing Benz last year launched
Mercedes-Benz new-generation E-Class sedans and Chrysler 300C large-sized
sedans.

"We are now harvesting the fruits of this turnaround program strongly
supported by the launch of new products," Butschek said.

"We are in the process of shifting focus from purely SUVs to standard and
luxury sedans."

He said the venture is preparing to launch the Chrysler Sebring mid-sized
sedan later this year and Mercedes-Benz C-Class sedans at the end of this
year and beginning of 2008.

"However, that does not mean we have given up our SUV heritage. We are
also investigating what opportunities we have for the future to
strengthen our heritage on the SUV side," he said.

Beijing Benz, which has an annual production capacity of 100,000
vehicles, is also making Mitsubishi Motors' Outlander SUV under a
technical licensing deal. But it has halted production of some Chrysler
SUV models.

Li Chunbo, an auto analyst with CITIC Securities Co in Beijing, said
profit should grow as the company introduces Mercedes-Benz vehicles.

"Mercedes-Benz is a fat-margin brand and has a strong brand image in
China. Therefore, Beijing Benz should be fairly profitable in the near
term as long as it has a stable sales growth," Li said.

Butschek said Mercedes-Benz E-Class and Chrysler 300C built at his firm
are well received by Chinese buyers. But he didn't reveal their sales
figures in the first quarter of this year.

The venture is localizing more spare parts for Mercedes-Benz sedans in
order to improve profitability in China, he said.

According to China's auto industry policy, the value of locally purchased
spare parts should account for at least 40 percent of the total value of
a vehicle made in China. Otherwise, vehicle will be charged import
tariffs.

"But I must admit it's a tough job to get local supply base to the level
of our requirements," Butschek said.

(China Daily 04/26/2007 page13)

(For more biz stories, please visit Industry Updates)

Learn Chinese, Chinesepod