Abney Associates advising investors on recent developments at Daimler AG, as the manufacturer of the Mercedes luxury car brand announces significant expansion in China.
Daimler AG has recently announced plans to increase production in China with construction of a $2.7 billion manufacturing plant as the automaker increases it efforts to surpass its German rivals in China’s lucrative luxury car market. The move comes as Daimler finds itself falling behind sales of both BMW and Volkswagen AG, Audi’s marquee in the Chinese market. Both of its rivals broke through the 300’000 car mark in sales this year after aggressive expansion of their own.
Daimler for whom China accounts for over half of all sales of its S model sedans and is the largest consumer of its E model cars, expects that its new facility will more than double Chinese production to 200,000 units per year as it seeks sales targets of 1.4 million cars this year. Already Daimler is receiving engines for European manufacturing from its recently completed power plant production line in the China.
“The luxury car market in China is one that no one is ignoring, at present its size and the rate at which it is expanding none of the key producers can afford to do so. Already this year we have seen large scale expansion from German automakers in the country, in both production facilities and dealership networks. Daimler is of course following suit to ensure it gains the best possible market share,” explained James Carter, Senior Vice President of Mergers and Acquisitions at Abney Associates.
Although Daimler did not set Chinese sales as a primary focus as early on as its rival BMW and Volkswagen did it is the only one of the three automakers to have commenced exports from China and is expected to rely on the domestic Chinese market for 50% of all sales of its vehicles by 2015. Daimler’s shares have had a well performing year to date continuing to trend up sharply giving a ROI of 33.8% for the period.
“With the Chinese market being so crucial for the expansion plans for luxury car makers it is a positive sign that Daimler is making these key expansion efforts for the right reasons. The cost being paid now is secondary to the benefits that are present as the market continues to grow. We are always happy to see a company that is of interest to our client’s and their portfolios continue to make smart decisions in regards to their future performance,” concluded James Carter, Senior Vice President of Mergers and Acquisitions at Abney Associates.
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