Mercedes lags in China as Audi and BMW Hit the Throttle

http://www.bloomberg.com/news/2012-07-02/mercedes-lags-in-china-as-audi-and-bmw-hit-the-throttle.html

After opening its first Chinese factory in 2006, Mercedes charged out of the gate and quickly won 22 percent of China’s luxury market. For the past two years, the company has been in a funk. Mercedes’s share today stands at 21 percent, versus 32 percent for Audi AG (NSU) and 23 percent for Bayerische Motoren Werke AG (BMW), according to researcher LMC Automotive Ltd.

In the midsize segment, China’s most popular luxury-vehicle category, deliveries of Mercedes E-Class sedans have tumbled 23 percent to 16,111 in the first five months of the year, according to data compiled by LMC. By comparison, sales of the competing Audi A6L have climbed 44 percent to 58,127 and BMW’s 5-series has gained 44 percent to 39,973.

Mercedes says the under-performance is temporary. The company is retooling its Chinese facilities for new models and a bottleneck in the production of the B-Class compact has limited deliveries.

Daimler has lagged behind Audi and BMW in China because of its late entry and a limited distribution network, said Thomas Callarman, director of the Center for Automotive Research at the China Europe International Business School in Shanghai.

By 2015, Mercedes plans to double its annual production capacity in the world’s biggest automobile market to 200,000 vehicles annually, though that won’t be enough to keep up with its rivals. BMW plans to quadruple potential output to 400,000 and Audi is seeking to more than triple capacity to 700,000 by the middle of the decade, according to the companies.