Pale Sale Drove Mercedes China’s Chief Out

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  Klaus Maier, who has worked in China for 7 years, is going to leave. His positions as the president and CEO of China will be taken by Nicholas Speeks.
  On October 9, Mercedes Benz (China) Automotive Sales Co., Ltd reported that its CEO and president Klaus Maier was going to resign from his positions in December. The successor has been confirmed to be Nicolas Speeks, the current CEO and president of Mercedes Benz Japan.
  Mercedes Benz gave a high remark on Maier’s job during his tenure in an official announcement, saying that he rounded off his duties in China and the shake-up was a normal periodic personnel change.
  However, an undeniable fact is that Mercedes Benz is more and more behind its direct rivals BMW and Audi in sales volume in China even though it went through fast development after its foundation. The gap was under heavier scrutiny in this year.
  The underperformed sale is believed to be an important reason for Mercedes Benz to change its boss in China. “The resignation of a regional chief is certainly related with the performance there,” said Wang Cun, marketing manager of China Automobile Trading Co, Ltd.
  The arrival of Speeks is thus considered Mercedes Benz’ will of enhancing its presence in China.
   Pale Sale to Be Blamed
  Along with Maier is Eberhard Kern, president of Mercedes Benz China. He was transferred to India as the director of this emerging market.
  Ulrich Walker, CEO and board chairman of Daimler Northeast Asia Investment Co., Ltd said that Mercedes Benz China made “adorable”achievements in China under Klaus Maier in the past 6 years.
  At the end of 2006, Dieter Zetsche, board chairman of Daimler-Chrysler replaced Peter Honegg with Klaus Maier, hoping to change the slow progress of Mercedes Benz in China.
  Maier, a German, came to China in 2005 as the market and sales director of Mercedes Benz. He took part in the establishment of Mercedes Benz China, scrutinizing its every process. Prior to that, he worked for Daimler Group for over 15 years and took the duties of the global sale of Mercedes Benz, Smart, Chrysler, Jeep and Dodge. He accumulated abundant marketing and distribution experiences in Germany and Singapore.
  After taking over the CEO of Mercedes Benz China, Maier introduced several new types of Mercedes automobiles into China. In the first three years of his tenure, he made 6 new types into China. Then, in 2009, Smart was brought into China as well.
  From 2006 to 2011, the sales volume of Mercedes Benz in China drove from 20 thousand units to 198.5 thousand units. According to the latest data from Mercedes Benz, by now the German brand has established a distribution network that covers about 100 cities and consists of 223 dealers.   And China has become the third largest market for Mercedes Benz in the world. It is a remarkable improvement compared with its 11th place before the appointment of Maier.
  However, even though Maier’s achievements in China were admirable, they were still paled in front of its competitors BMW and Audi.
  In the first nine months of this year, BMW sold about 237.1 thousand cars in China, up 34% year on year. Audi, the champion of luxury autos in China, had a 31% increase in its sales in this country with 297.1 thousand units sold.
  In comparison, Mercedes Benz sold 144.5 thousand cars in China in the first three quarters of this year. The increase rate was only 6.7%.
  Mercedes Benz once declared ambitiously in the 2009 Shanghai Auto Fair that it would catch up with BMW in China in two or three years. Now it sounds more like a joke.
  Guo Yong, head of the Commercial Information Center at Beicheng Automobile Trade Market in the Asia Olympic Village in Beijing, said that the current problem of Mercedes Benz in China cannot be solved by changing the boss. It is closely related with its development strategies in China. Maybe Mercedes Bens has already fixed new development strategy and need a strategy-minded man to carry it out.
   Product Advantages Not Easy to Show
  The increasing gap between the sales of Mercedes Benz and BMW and Audi reveals that Mercedes Benz’s products have no advantages compared with its rivals. The incomplete integration of distribution channels made things worse. These are the problems that Klaus Maier failed to resolve and are what Speeks needs to confront.
  Mercedes Benz is usually called “Big Benz”in China. The medium- and large-sized sedans are always its main products in China. However, in the past few years, the advantages of large cars are no longer visible.
  From their market performance, Mercedes Benz’s C-class car is defeated by BMW 3-Seires and Audi A4L. And its E-class is no better than Audi A6L and BMW 5-Series.
  According to the statistic data from the China Association of Automobile Industry, from this January to July, FAW-Volkswagen (a Volkswagen’s joint venture in China) saw the sales of Audi cars increase by 35.15% to 143.2 thousand units. The sales of BMW 3-Series and 5-Series also increased by 20.77% to 66 thousand units. In comparison, Beijing Benz (Mercedes Benz’s joint venture in China) only sold 33.3 thousand units of C-class and E-class with a poor 7.48% negative increase.   In the SUV field, Mercedes Benz and Audi launched GLK and Q5 simultaneously at the 2008 Beijing Auto Fair. Four years later, Q5 has seen its production localized in China while GLK was just massively launched in China.
  “Few changes happened to the main types of automobiles of Mercedes Benz, which is no longer a counterpart of BMW and Audi,” said Wang Cun with China Automobile Trading Co., Ltd. Several years ago, Mercedes Benz was at the same starting line with BMW but now it is far behind the latter.
  Wang Cun said that the passenger car market in China was witnessing a trend that small cars are more and more popular. Mercedes Benz was much slower than BMW and Audi in the small-car market, partially explicating its stagnancy in China.
  In addition, Mercedes Benz lowered the price of S-class cars in China this February, initiating the price war of luxury cars in China. The average price drop was CNY 200 thousand yuan and in some places the car was CNY 380 thousand cheaper than before. An expert said that the drastic drop in price will damage the brand image of Mercedes Benz.
  Then there are also problems with the quality. In recent years, Mercedes Benz was usually reported with problems. In the late September, about 300 owners of Mercedes Benz cars collectively complained that the content of formaldehyde in their cars was 4 times as high as the standard. Mercedes Benz China issued the notice, admitting that some C-class cars might really have “abnormal smell” and the investigation has begun.
   Shackled by Distribution Channels
  As the new boss of Mercedes Benz, Speeks’ primal task is to integrate the distribution channels of Mercedes in China.
  For long, the disordered distribution channels directly strangle the sales of Mercedes Benz in China. “It is now the most prominent problem of Mercedes in China,” said Yan Jinghui, vice general manager of Beicheng Automobile Trading Market. It is the utmost reason for Mercedes Benz’s pale performance in China.
  Actually, the problems of distribution channels have been haunting Mercedes Benz China for long as the German company never cut off the disputes with Lei Shing Hong Kong Co., Ltd (Lei Shing) and Beijing Auto Industry Corp (BAIC).
  When the Beijing Benz was founded in 2005, Mercedes Benz has two distribution channels that are independent from each other in China. Mercedes Benz China controlled the sale of imported cars while Beijing Benz controlled the distribution of domestic-made cars. The two parties rarely communicate or work with each other and implement different sales measures, leading to the disputes and competition between imported and domestic-made cars.   When the E-class was initially localized in China, it was highly expected to be a trump to battle against BMW and Audi. However, it ended up with a poor performance, for which the internal conflicts between two distribution channels should be blamed.
  Before the launch of domestic-made Eclass cars, Mercedes Benz China cleared out the inventory of imported E-class cars by promoting the sale with the discount of CNY 10,000. However, when the China-made E-class cars finally came to the market, Beijing Benz pushed the price back up. Chinese consumers could not accept it and the homemade E-class cars dragged down the sale in China instead of pushing it up.
  “When the market is good, Mercedes Benz China and Beijing Benz earned profits together. But when the market turns bad, the two began to compete with each other,” Wang Cun said.“In comparison, BMW and Audi have a single channel, which makes them more efficient in distribution.”
  Mercedes Benz has been planning to change this for long. From July 2011, it began to integrate its distribution channels in China. But the negotiations with Lei Shing and BAIC usually turned out to be fruitless.
  The failure in integrating distribution channels is the conflicts of interest between Lei Shing and BAIC. To be more exact, this is about the shares.
  According to Mercedes Benz’s plan, it will found a “BAIC-Mercedes Sale Company” with BAIC in China to take over the distribution of its products in China.
  But Lei Shing, which held 49% shares of Mercedes Benz China’s shares, does not want to be put outside of the new joint venture. They asked for “extremely high compensations”from BAIC and Mercedes Benz and wanted to take some shares in the new company,
  None of the three parities was willing to give up. The new distribution company for Mercedes Benz has not been founded. Slight progress was seen this August as Daimler and Daimler Northeast Asia, the second and third largest shareholders of Mercedes Benz China spent CNY 57.6 million increasing their shares from 51% to 75%. In comparison, Lei Shing’s shares dropped from 48% to 25%.
  But till now, there is no news about when and how the new distribution company of Mercedes Benz is founded. This is still a problem in front of Speeks.
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