Thesis Statement: Mercedes Benz Luxury Cars on the China Market

With the development and stability of Chinas economy, car purchasing in China is growing exponentially. It became the largest in 2009, and has remained the largest ever since. Consequently, this Chinese Boom also has a major impact on the sales of luxury cars. (1) (2)

In 2016, 8.6 million German brand cars were sold in the Chinese automobile market (accounted for 38.4% in the total turnover of 22.5 million in the global car market), leading China to be the biggest market of premium cars in the world. Among them, BMW, Audi and Mercedes-Benz have been among the thriving car models possessing wide profit margins in the business market.(3)

According to Mercedes Sales Manager, MichealTelep the main profit expounding strategy in various car brands is based on specializing in designing unique car features. To be precise, these features include; NASA-approve car seats that prevent one from getting tired during long drives, Heated wiper blades that melt snow in order to enhance a drivers vision and Automatic GPS(Global Positioning System) to inform one on traffic congestion hence determining the best way out (4). In relation to KeesDorsts article, identifying the situation at hand which is enhancing customer loyalty will enable one to come up with ideal solutions. All of these new features are set in order to make the young population in the Chinese market purchasing these particular car brands which in return increases the profit margin for this company.

Mercedes C.E.O, Dieter Zetsche considers that the populations between the ages of 25 to 35 are the largest car buyers and sellers in the Chinese market. The relentless car purchase and selling has resulted into the rampant issues of license plates in China. In addition, Dieter Zetsche makes a comparison and affirms that the issuing of license in China has increase by 5.69% unlike in Germany which has increased by 3.27% in the current decade.

Extrapolating from these data, it is inferred that the post 80 and 90 has become the largest car target group in Chinese car market. Furthermore, the number of younger car owner has increased rapidly. (4)

In a recent interview, Dieter Zetsche, the CEO of Mercedes Benz, said Mercedes customers in China are below the age of 37. The increase in purchase of Mercedes Benzs in China has resulted in lowering their car prices in order to attract even more customers. Young Chinese customers are therefore playing a more important role in the performance of every car brand in China. (5)

Among these car brands, BMW and Audi both have a developed strategy to draw in young Chinese customers. (6) In 2015, according to the licensing number of German cars launched in China by the Chinese Ministry of Public Security, we can find that the licensing growth rate of Audi owned by post 85 was 423.86%, ranking No.1. During 2007 to 2015, BMW got the first place in licensing record, with a licensing record of more than 577,600 cars, while Mercedes Benzs was ranking third with a licensing record of 368, 900 cars.

Despite that, Mercedes Benz has been thriving in the Chines business market; other popular car brands have posed competition. Specifically, these car brands include; Audi, Chevrolet, Jaguar, Land Rover and Volkswagen. Respectively, each of these cars has increased its demand in the Chines market by; 5.2%, 4.5%, 5.4%, 3.6% and 6.1%. Mercedes Benz on the other hand has increased its demand in the Chinese market by 7.5% which illustrates stiff competition among these car brands. (7) Stiff competition implies that a slight mistake made by Mercedes will make them to be outshined by their competitors. It further implies that lowering their selling price is an ideal business strategy in order to increase its demand in the business market.

In 2016, Daimler opened its Beijing R&D center which aimed at bettering Chinese business market via offering various tastes of cars. As a staff from the center said, "Among the R&D centers more immediate tasks are better tuning Mercedes-Benz in with its Chinese customer base. (4) To be specific, the staff member implied that the company was taking specifications from potential buyers on the features that they would like into be in their new car models. In relation to KeesDorsts article, identifying the situation at hand which in this case is , creating an ideal customer platform, will enable us to come up with profitable conclusions and solutions. It hence, results in creating a good customer relationship which would attract people in purchasing Mercedes Benz. Also, it results in creation of a platform for customers to provide specification has resulted in widening the average age of Mercedes Benzs customer up to the age of 38, unlike in Germany where Mercedes customers have a maximum average age of up to 20 years (6). It implies that the Mercedes Benz has a high demand in China than Germany concluding that the company should invest more in the Chines market.

Actually, Mercedes Benzs newest A-Class model was launched on the Chinese market in November, 2010 and got to be manufactured locally in 2014. This car model, designed specifically for young people, changed Mercedes Benzs traditional image and label of Business, Maturity and Success in the Chineses mind and it was presented in front of younger consumers with the wholly new temperament and image to be Young, Lively and Fashionable. (7)

However, Mercedes Benzs A Class still only ranked No.3 in the competition with the same level competitors, being Audi A1 and BMW 1. (9)

From the Report of Mercedes Benz Customers Second Choice in 2016, 21.9% first time buyers will continue to choose Mercedes Benz in their second car purchase. 17.8% have already planned to change to BWM, while 19.5% choose to purchase cheap cars from Toyota, Nissan and General motors. 17.5% prefer in purchasing Audi cars while 12% prefer purchasing second-and sports cars from Subaru and Challenger (2). The remaining 9.7% are not decided which brand to choose.

Moreover, under the two children policy and new energy cars license subsidies policy in China; Chinese car consuming groups were forced to change their choices. More and more young consumers are considering the spaces in car very seriously, as well as the energy preference, are becoming the rigid demand. (10)

The key reason as to why people change from one car brand to another is to have a new experience of various features which are not offered in the initial car they owned. Mercedes Benzs owners hence sell their cars in order to have a new taste of other car brand since the company did not offer a platform for customers to create specifications according to their preference. The unreliability and high prices of Mercedes Benz spare parts has resulted into these car owners selling their cars in order to evade this disadvantage. (5)

Therefore, this thesis is created according to these market facts in China. Based on Mercedes Benzs sales strategy, the changes of demands among Chinese consumers and the adjustment of policy in the auto market, this thesis tries to use design tools to improve Mercedes Benzs brand loyalty and the first-time customers user experience of A-Class model (3). It will result in to increase in the possibility for them to choose Mercedes Benz again in their second car purchasing.

Brand loyalty has hence been considered to be one of the most vital considerations which will play a vital role in the success of Mercedes Benzs in Chinese markets. Precisely, Brand loyalty can be developed by Mercedes Benzs lowering its prices, creating an efficient customer service platform and easing the availability of its spare parts in order to avoid inconveniences. The Chinese market has illustrated high future profit margins for Mercedes brand hence its developers should consider increasing its investment in this profit-rewarding market. (4)

Reference

(1) Feijter, T. (2016, May) 5 Stunning Facts About the Chinese Car Market You Need to Know. Retrieved September 2. 2017.

https://www.forbes.com/sites/tychodefeijter/2016/05/16/five-things-you-need-to-know-about-the-chinese-car-market/#57e689723025(2) China officially biggest market for Mercedes-Benz

https://seekingalpha.com/news/3020896-china-officially-biggest-market-mercedes-benz

(3)2016 (Full Year) China and Worldwide German Luxury Car Sales

https://www.best-selling-cars.com/international/2016-full-year-china-worldwide-german-luxury-car-sales/4. "More Chinese Taking Second Look At Various Car Brands." Wardsauto.com. N.p., 2017. Web. 18 Sept. 2017.

http://wardsauto.com/industry/more-chinese-taking-second-look-at-various-car-brands/

(5) Mercedes customers in China are younger: CEO - MSN

https://www.msn.com/en-us/money/other/mercedes-customers-in-china-are-younger-ceo/vp-BBA1fbm(6)BMW goes for pole position in fast-growing Chinese car market. May 31. 2017. By Charles Clover in Shenyang and Patrick McGee in Frankfurt

https://www.ft.com/content/92486e7c-4034-11e7-9d56-25f963e998b2

(7) The data comparison of luxury cars customers in China

http://www.techweb.com.cn/internet/2016-06-28/2353042_7.shtml

(8)Mercedes-Benz Research & Development Center in China: an integral and essential part of the global R&D network http://media.daimler.com/marsMediaSite/en/instance/ko/Mercedes-Benz-Research--Development-Center-in-China-an-integral-and-essential-part-of-the-global-RD-network.xhtml?oid=10059026

(9) BMW hopes to draw in young Chinese customers with smallest-ever 1-Series sedan.Article by Christian A., on December 19, 2016 https://www.4wheelsnews.com/auto/bmw-1-series-sedan-china-customers-36443.html(10) The Report of Mercedes-Benz Customers Second Choice - 01.02.2016 Beijing Normal University(Communication Lab) with Cred Data Analysis Co,Ltd

http://share.iclient.ifeng.com/news/shareNews?aid=105868975&mid=Free Research III

Stakeholder Analysis and Assumptions

Stakeholder Analysis

Competitors: they are the same level luxury car brands in Chinese market. Among them, BMW and Audi are the main competitors. Besides, the luxury car brands from Japan, the U.S. and other countries are also competitors. All of them compete to obtain higher market shares, better targeting to the Chinese customers taste and a more exclusive brand image or preference in the young consumers mind. (3)

Car dealers and 4S Stores: car dealers in China are facing a rapid transformation age. On one hand, they are forced to let the repair and maintenance department be independent based on the requirements of manufactures and government.(6)On the other hand, they need to proactively promote the new energy cars based on their branding regulations and other legal measures. Meanwhile, to satisfy young customers and to accept these changes are also great tasks for them in the next years.

Government and Auto-Authorities: they are the policy maker and publisher to regulate the market. China, with huge population and heavy air pollution recently, has made several rules to regulate the auto market, including vehicle restriction policy and license-plate lottery policy. Furthermore, China implemented the national vehicle emission standard I from January 1, 1999 to 2003, and plans to implement the national emission standard VI in 2020 (8). Cars failing to reach the emission standard wont be allowed to purchase and trade in vehicle market. These policies are working in the purpose of reducing the vehicle overload in the city and better adapt the cars to be more environmental friendly so that to decrease the pollution.

Customers: With the two-child policy, Chinese familys option while doing cars purchasing are significantly i...