Fidest – Agenzia giornalistica/press agency

Quotidiano di informazione – Anno 33 n° 244

Daimler to Invest Heavily in production in China and US

Posted by fidest press agency su venerdì, 3 febbraio 2012

London.By Vishwas Shankar, Benny Daniel and Pietro Boggia, Frost & Sullivan“The investment of the Mercedes Benz car division of German carmaker Daimler AG of more than 5 billion US-Dollars in production facilities clearly illustrates Daimler’s preparedness to invest outside of Europe where its share of production and sales over other regions is expected to go down at least 10 per cent and 7 per cent respectively by 2018.Daimler AG moves towards just three key platforms to produce more than 2.7 million cars by 2018, and with a 2.6 billion US-Dollars investment in production capacities additionally in China and another 2.4 billion US-Dollar additionally in its North American business, makes it a complete business case for retooling (so that all plants realign to Europe) which could make vehicles built from common platforms at will from any of the plants.From a micro-level analysis a plant expansion is definitely on the cards for Daimler in North America and also likely by 2014. An entirely new plant where both production and sales is expected to go up only to the tune of 130-140K units by 2018 from 2010 levels means a weak business case, being 150-200k units the optimum break-even point for an investment in a new plant. This could reflect however, the fact that Daimler is expected to become more aggressive than previously forecast and starting in 2013 itself, as part of the German automaker’s long-term plan to be the leader in the global luxury-car segment by 2020.Another reason for the investment could be the fact that specific parts sourced out of Europe to North America could have been impacted by the currency fluctuation when 1Euro was 1.4$ at the end of 2011 and volumes in North America would have to be increased. Closing the gap between place of production and point of sale is crucial for European automakers to reduce local currency fluctuation risk.The focus of investment however, is clearly on Asia with a 10 per cent and 7 per cent increase in production and sales respectively volumes by 2018 over 2010.Of this, China alone is expected to contribute nearly 95 per cent in both production and sales respectively by 2018 over 2010, which means in all certainty that there is a highly profitable business case to invest.An increased production could be attributed by increased penetration of localised high volume components. China is after all the fastest growing luxury vehicle market globally, and Chinese customers demand vehicles flavoured with local styling efforts.For Daimler the proximity to Asian markets supports the decision to invest in China, where its immediate competitors like BMW and VW Group are also increasing volumes to build their brands. Lowering logistics costs for such luxury vehicles it’s another strong profit booster for OEMs which leads to localise production.
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