Auto industry: pioneering spirit of ETOWN drives auto sector to new standards of excellence

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China is the world’s fastest-growing car market – and Beijing ETOWN is home to a Mercedes-Benz plant that is creating luxury models tailor-made for Chinese drivers and is breaking new ground in the country’s luxury car market.

Chinese president Xi Jinping and German chancellor Angela Merkel stood side by side in Berlin as Mercedes-Benz and its Chinese partner signed a billion euro deal to expand joint venture operations in Beijing ETOWN.

The presence of the two leaders at the ceremony with a host of other dignitaries underscored the importance of China to the luxury car market – and the vital role that Beijing ETOWN and the Beijing Benz Automotive joint venture, BBAC, has to play.

As well as the first engine-making plant for Mercedes-Benz outside Germany, Beijing ETOWN is home to two research and development departments that adapt vehicles and engines to Chinese requirements.

Speaking at the ceremony in March 2014, Dr Deiter Zetsche, chairman of Mercedes-Benz parent company Daimler, said: "We are deeply rooted in China. The agreement we have signed today shows once again that we are making steady progress in China together with our longstanding partner BAIC (Beijng Automotive Industry Corporation).

"The Chinese automobile market continues to have great potential. We want to participate in this growth, also by expanding our local production."

Accelerated production

Today, as Mercedes-Benz continues to step up its production and research capabilities in Beijing in an attempt to catch up with and overtake the Chinese operations of rival German car makers Audi and BMW, that potential looks as strong as ever.

Last year, despite a slowdown of economic growth, car sales across China still grew 9.9% year on year compared with16% in 2013 – a growth figure most global car manufacturing markets can only dream of.

In 2015, the Mercedes-Benz brand hopes to sell more than 300,000 vehicles in the country, two-thirds of them built locally at the plant in ETOWN.

 Mercedes Benz


The agreement signed in 2014 – part of a €4 billion joint venture – will see €1 billion used exclusively in 2015 to expand the production capacity in Beijing for passenger cars and engines.

Two variants of the new E-Class model are produced by the joint centre – the E-Class sedan and the E-Class sports sedan. Both models use the new four-cylinder and six-cylinder BlueDIRECT direct injection engines produced by the Beijing Benz engine factory in ETOWN.

The first Mercedes-Benz cars built in China – the C-Class – were produced in Beijing ETOWN in 2007. Three years later, in 2010, the first cars to be adjusted in design terms for the Chinese market rolled off the production line.

Chinese characteristics

That trend has continued and a key element of car production in China today is to adapt vehicles originally designed and produced in Europe and the US to the different needs and demands of the Chinese market. What drives well in Berlin and Boston, in other words, will not necessarily be ideal for the roads of Shanghai or Shenzhen.

"The importance of localization has been elevated to an unprecedented level, which has contributed to the development of domestic models with implications for product design and process quality management," a spokesman for the Beijing joint venture tells Euromoney.

"In order to meet the special needs of Chinese users for the rear space, the production of the new E-Class cars is of the long-wheelbase version. Its luxurious spacious interior provides users with a unique driving experience.

"Since luxury cars for the Chinese market are bought mainly by younger users, the new E-Class cars have a lot of dynamic elements in the design, and the paint colour selection also offers more options.

"Additionally, since first appearing on the market, the new E-Class cars are given a specific vehicle tuning, based on China’s environment, climate and road conditions, so that the final product is precisely adapted to the needs of Chinese consumers."

Home advantage

Another landmark moment for BBAC in Beijing ETOWN came in June 2014 when blocks, cylinders heads and crankshafts produced there were exported to Germany to be used in German-made Daimler products, incorporating the China factory into the global Daimler supply chain for the first time.

Mercedes Benz ETOWN  
The spokesman says that the support from the ETOWN government in attracting talent, and providing facilities and business-friendly policies, has been pivotal in the development and growth of the joint venture.

As well as producing cars specifically tailored for Chinese consumers, Mercedes-Benz appears to be considering further localization steps that would make it the first luxury car maker to launch models in China before putting them on sale in Europe and the US.

Until now, cars have been launched in Europe or the US first and China later. But in an interview with Automotive News in January, head of research and development at Mercedes-Benz Thomas Weber suggested that process could be reversed for future launches.

"From now on, China plays a major role for our global product development process," he told the publication. "Why not be first at some point? … That’s the trend in my view."

Global appeal

The slowdown in the rate of growth has done nothing to diminish the appetite and ambition for growth in China among luxury global car brands like Mercedes-Benz. If anything, it has made it keener.

"China’s auto market has become a battleground for global car makers," the spokesman says. "Although the 2014 growth rate in the auto market slowed, its potential is still great. A number of luxury car brands have gradually taken a localization strategy, so competition in the market will become more intense."

One positive aspect in the arrival of the international brands is that they have brought advanced manufacturing technology and management concepts to China, the spokesman says. "On one hand, the technology will help us achieve a qualitative leap in Chinese own brand," he says. "On the other hand, the unprecedented, fierce competition will bring a higher demand on the quality of employees, which will promote the overall quality of Chinese employees and provide valuable impetus for the development of China’s auto industry."

Looking ahead, he says: "We will continue to focus on market development trends, to accelerate product development, to enhance localization and to enhance competitiveness.

"At the same time, we will continue to focus on the needs of users, providing products that are made in China, exclusively for Chinese customers."