Daimler still bullish about China amid BMW woes

By REUTERS | 13 January 2015

DETROIT: Daimler chief executive officer Dieter Zetsche said on Monday he saw no signs of a significant slump in sales for Mercedes-Benz luxury cars in China, even as rival BMW struck a more cautious tone.

Daimler and BMW expect higher sales in 2015, after reporting record deliveries and higher China sales in 2014.

Carmakers are now grappling with a Chinese economy where the pace of car sales is slowing down after years of high double-digit gains.

Asked at the Detroit car show about sales momentum in China, Zetsche told Reuters, "I'm not seeing that brutal slowdown of growth?. I see a pretty stable economic development."

Zetsche went out of his way to dismiss speculation that sales in China were under threat.

"Fears of a decline of the Chinese market have been around for 10 years. We still experience very strong dynamics in the market," Zetsche told reporters, adding that sales of the S-Class and E-Class were still very strong.

Asked by Reuters whether volume gains in China can only be made at the cost of lower margins and prices, Zetsche said: "That's not what we experience. Of course there is a strong correlation between GDP and development of the car market."

Zetsche's remarks stand in sharp contrast to comments made by BMW late last week. "The market slowed down quite a lot in the last quarter," Ian Robertson, board member for sales and marketing said about sales in China.

Foreign carmakers are now facing calls by the China Automobile Dealers Association (CADA) to shoulder some of the burden of lower profits. Last week, CADA took the unprecedented step of saying BMW had agreed to pay 5.1 billion yuan (US$820 million) to dealers.

Overall, Zetsche sees strong momentum in other markets including the United States. "I see very few if any markets where we would see a reduction in demand," Zetsche said.

The swing in exchange rates in recent months, particularly between the dollar and the euro, will not provide a significant boost to earnings, Zetsche explained.

"We are hedged for a certain amount of time. There will be very little upside potential in Q1," Zetsche added.