China is the world’s largest car and electric vehicle market, and everyone wants a piece of it. The competition between global and local brands is fierce, and even more so in the electric vehicle space, as a slew of start-ups also vie for attention. Amid all of this, Mercedes-Benz finds itself in a precarious position, because while it dominates the luxury segment, the electric vehicle space remains rather complicated.
Mercedes-Benz CEO Ola Kaellenius acknowledged that China’s EV market may mature starting with affordable EVs. “Growth in China’s electricity market is really starting from the bottom. We have almost no segment for anything,” he was quoted by Reuters as saying. “Premium and premium luxury are still in their infancy. We have to exercise some strategic patience here, See how it develops.”
Mercedes, which offers models such as the EQE and EQS electric SUVs in China, was forced to cut prices late last year to make the models more attractive to potential buyers. Although the demand for electric vehicles in China has been rising, the increase in the number of players has led to stiff competition. Some of the biggest global players here include Tesla, Volkswagen, and Mercedes. The dominant local players are BYD, SAIC, Great Wall Motors, Geely, Xpeng, Chery and NIO. Models such as the 2020 Hongguang Mini EV are priced at 28,800 yuan (about $4,300). There are dozens of vehicles priced between $10,000 and $15,000 made by local brands.
So, while critics can continue to claim that labor costs in China are low, and that local companies tend to spend much less on R&D, there has been a constant concern that established brands will offer profitable prices regardless of their niche in the market segment. How is production positioned.
First published date: Feb 18, 2023 at 18:52 PM CST