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 April 26, 2007)