Mercedes-Benz doubles down on China By Reuters

By Norihiko Shirouzu

BEIJING/SHANGHAI (Reuters) – Mercedes-Benz, the German company founded by the inventors of the motor car, is pouring more resources into its cutting-edge research and design capabilities in China as the centre of gravity of the new auto world shifts eastwards.

In a drive to create a “home away from home”, Mercedes-Benz is doubling down on bases in Beijing and Shanghai to stay ahead of regulations and consumer trends in a car market that outstrips the United States and Germany combined.

Three years after initially announcing plans to strengthen its research and development (R&D) in the country, the luxury car brand owned by Daimler (OTC:) will unveil its new Tech Center China in Beijing this month.

Reuters has spoken to four people close to the tech centre and the brand’s Chinese design studio who are familiar with the company’s new China strategy. All declined to be named because they are not allowed to speak with the media.

With 1,000 engineers, the new tech centre is more than three times the size of the one Mercedes-Benz opened in 2014 and the first outside Germany that can test “everything”, putting it more “on par” technically with the far bigger R&D headquarters near Stuttgart, a person close to the centre said.

Mercedes-Benz has also invested significantly in upgrading its Chinese design studio and has moved the whole team from Beijing to Shanghai, a megalopolis of about 25 million people known as the car design capital of China.

Mercedes-Benz has good reason to elevate its Chinese operations.

Its car sales in China jumped 12% last year to a record 774,000 despite the pandemic, streets ahead of its next two markets, Germany on 286,000 and the United States with 275,000.

About 80% of the cars it sold in China were also made there, typically with an array of China-only features and models, and Asia overall accounted for almost half its global sales in 2021.

China’s auto market, the biggest in the world since 2009, is expected to carry on growing steadily, with demand forecast to reach 35 million vehicles by about 2030 versus 25 million now.

‘SECOND HOME’

But Mercedes-Benz, like all foreign automakers in China, is under growing pressure from local EV startups such as Xpeng (NYSE:), Li Auto and Nio (NYSE:) and their stylish vehicles with high-tech features tailored to Chinese consumers.

That’s why the German carmaker’s “second home” strategy for China is focused on making its design and technology more agile, to respond quickly to the ever-shifting landscape and to firmly entrench the Mercedes-Benz brand, the four sources said.

“The expectations in China are for the in-car experience to be served by a localised digital services ecosystem, and such solutions must be conceived and built by people that live in China and truly…