Mercedes-Benz raises stake for unified dealer management

China Daily - German auto group Daimler AG, the parent of Mercedes-Benz, recently reached an agreement with partner Lei Shing Hong Ltd for a bigger stake in the luxury brand's China sales company, its latest move to integrate sales channels and accelerate growth in the country.

Daimler will increase its stake in Mercedes-Benz (China) Ltd from 51 to 75 percent through a capital increase, the company said in an emailed statement to China Daily last week.

The contract was signed on July 26 by Daimler AG, Daimler North East Asia and Lei Shing Hong, and is expected to get regulatory approval by the end of this year, the statement said.

The restructuring will leave Hong Kong-based Lei Shing Hong, Mercedes-Benz's biggest dealer in China, with only a 25 percent stake - down from 49 percent - in Mercedes-Benz (China) Ltd, which sells imported Mercedes-Benz cars.

At the end of April, Lei Shing Hong owned about 50 Mercedes-Benz dealerships in China, almost a quarter of the German brand's network of more than 210 dealers.

Daimler also runs a joint venture with Beijing-based Chinese automaker BAIC Group that produces and sells Mercedes cars including the E-Class and C-Class sedans as well as the GLK sport-utility vehicle. The tie-up is named Beijing-Benz Automotive Co Ltd.

The two separate operations have grappled for several years over control of the Mercedes sales network, which has impeded the brand's growth in China.

In the first half this year, Mercedes-Benz sold 105,200 vehicles in China, an 11 percent year-on-year increase, but numbers that showed a widening gap behind its two major competitors Audi and BMW, which both reported a sales surge of more than 30 percent.

About a third of the company's total deliveries in China are locally made Mercedes-Benz vehicles. The number is expected to reach 70 percent by 2015 as the luxury carmaker raises local production capacity. The change product mix is also expected to affect dealer interests.

Industry analysts note the company needs a unified sales management plan for both imported and locally made products to clear the way for accelerated growth in China.

According to Daimler, an all-new sales joint venture company between Mercedes-Benz (China) Ltd and Beijing Benz is in the pipeline, which will be responsible of overall management of sales activities for both imported and locally made vehicles.

Previous media reports said that Lei Shing Hong was the stumbling block in the plan, but the latest stake change indicates that the problem has been solved.

"The increased stake (in Mercedes-Benz (China) Ltd) is an integral part of our strategy of repositioning our sales activities in China," Dieter Zetsche, chairman of the board of management of Daimler AG and head of Mercedes-Benz Cars, said in a recent conference call when the management discussed second-quarter results with analysts and investors.

"Now having a signed agreement with Lei Shing Hong, we have (taken) the first step with one partner to achieve the second step of a legally integrated sales organization together with BAIC," he said. "We are in these negotiations but not finalized."

Zetsche said that Mercedes-Benz will accelerate expansion of its dealer network in the second half. Along with new products the company plans to launch in the second half of the year, sales in China could have a major lift starting in the fourth quarter, he said.