The Revelation of Mercedes-Benz Trucks' Localization Production in China

On July 19, 2023, Mercedes-Benz Trucks held a Technology Experience Day in Hefei, China, showcasing its unwavering commitment to placing customer demands as the core driving force, adhering to positive research and development, and dedicating itself to promoting high-quality development in the Chinese logistics sector through innovative technological advancements.

During the Technology Experience Day, Mercedes-Benz Trucks demonstrated a series of innovative technologies, including the ADA 2 Second Generation Active Driving Assistance System, ACC Full-Speed Adaptive Cruise Control, and the Second Generation MirrorCam Electronic Rear-View Mirror. Marcus Kliewer, Vice President of Research and Development at the Mercedes-Benz division of Foton Daimler Automotive, stated during the event that Mercedes-Benz Trucks meets the high reliability and timeliness requirements of the logistics market with practical and leading-edge cutting-edge technologies.

In 2016, Mercedes-Benz Trucks announced its plan for localization production in China - setting up the Mercedes-Benz division under the Foton Daimler Automotive Co., Ltd. in a joint venture. The company invested over 3.8 billion yuan in Huairou, Beijing, to establish an exclusive manufacturing factory for Mercedes-Benz Trucks, with an annual production capacity of 60,000 heavy trucks. On September 23, 2022, the first Mercedes-Benz Truck rolled off the assembly line in the new plant and was officially launched on December 10 of the same year.

Why Mercedes-Benz Trucks Chose Localization

China is the world's largest heavy truck market, with over 1.6 million heavy trucks produced and sold in 2020, and an ownership of nearly 8 million vehicles. With the transformation and upgrading of the logistics and transportation industry, the demand for high-end heavy trucks from Chinese customers is growing rapidly. Experts predict that by 2025, models priced above 400,000 yuan will account for 40% of the market. Faced with such opportunities and challenges, foreign commercial vehicle brands are accelerating the process of localization to adapt to the changes and demands of the Chinese market.

As a leading global commercial vehicle and engine manufacturer with a century-long brand history and technological expertise, Daimler Trucks possesses a strong reputation. Mercedes-Benz Trucks, as the high-end heavy truck brand under Daimler Trucks, is renowned for its outstanding quality, performance, safety, and energy efficiency. To better serve the Chinese market and customers, Daimler Trucks decided to produce Mercedes-Benz Trucks in China and achieve product localization.

Challenges and Solutions

Brand Culture Localization

International truck brands entering the Chinese market face both tremendous opportunities and challenges. On one hand, the Chinese market is vast with diverse demands, and there is a strong interest and demand for international brands and services. On the other hand, the market structure in China is complex, with strict policies and regulations, a unique cultural atmosphere, and fierce competition between local and international truck brands. To succeed in the Chinese market, international truck brands not only need to understand and respect the cultural background, aesthetic values, consumption habits, and values of Chinese consumers, but also present the brand's unique identity in a localized manner. They need professional and localized operational strategies to quickly adapt to market changes and build good relationships with the government, partners, and customers. Only by localizing brand culture can they better grasp the opportunities, meet the needs of Chinese consumers, tackle challenges in the Chinese market, and achieve long-term development of the brand in China.

The Mercedes-Benz Trucks localization project team summarized their value proposition as "In China For China" with the slogan "Shining in the East, Driving Steadily into the Distance." These eight words reflect Mercedes-Benz Trucks' commitment to producing and tailoring trucks for China, expressing their blessings and confidence in Chinese customers and the logistics industry. Additionally, Mercedes-Benz Trucks also registered a service brand with Chinese characteristics and a sense of affinity called "BEN HAO YUN." This brand name incorporates "Benz" while also implying smooth transportation and prosperous business. Through these localized cultural expressions, Mercedes-Benz Trucks demonstrates its emphasis on and respect for the Chinese market while fostering a closer connection and emotional bond with Chinese customers.

Product Price Optimization

In 2022, the Chinese heavy truck market saw a sales decline of 52% due to economic downturn. Import-brand heavy trucks with prices higher than domestic ones made users hesitant. In the minds of Chinese customers, Mercedes-Benz Trucks were typical representatives of expensive import-brand heavy trucks, with individual vehicle prices exceeding 800,000 yuan and even surpassing 1 million yuan with additional fees.

To better adapt to the Chinese market and change the inherent perception of Chinese customers toward import-brand heavy trucks, Mercedes-Benz Trucks introduced two series of locally produced heavy trucks: Actros and Actros C. Both series adopted the successful Actros technology platform with an integrated price range of 500,000 to 700,000 yuan. The powertrains of the two series differ slightly: Actros is equipped with Mercedes' latest third-generation OM 471 straight-six-cylinder engine and Mercedes Powershift 3 12-speed intelligent AMT gearbox, providing various horsepower versions such as 450hp, 480hp, and 530hp, with maximum torque ranging from 2200Nm to 2600Nm; Actros C is powered by Cummins 12L/13L engines and ZF TraXon gearbox, offering multiple horsepower versions from 410hp to 580hp, with maximum torque ranging from 2300Nm to 2600Nm.

It is evident that the localized Mercedes-Benz Trucks are priced much lower than the imported ones. Besides price optimization, Mercedes-Benz Trucks have two advantages in post-use aspects that attract Chinese customers: fuel efficiency and resale value. Thanks to intelligent design and technologies, Mercedes-Benz Trucks achieve optimal matching and optimization of powertrains through intelligent shifting strategies, coasting in neutral, and PPC power system predictive cruise control. Additionally, Mercedes-Benz Trucks focus on aerodynamic design, such as incorporating electronic rear-view mirrors, to reduce wind resistance and fuel consumption. Compared to similar models, Mercedes-Benz Trucks save 8% to 14% on fuel consumption. Over a distance of 300,000 kilometers in a year, this translates to a fuel saving of 4 liters per 100 kilometers, resulting in cost savings of 85,000 yuan annually.

Moreover, Mercedes-Benz Trucks retain high residual values in the second-hand market after 5 to 7 years, higher by 80,000 to 100,000 yuan compared to other domestic high-end trucks. Combining the benefits of fuel efficiency and resale value, Mercedes-Benz Trucks can offset the price difference with domestic high-end trucks, making "Mercedes dreams" achievable for more Chinese users to enjoy efficient, reliable, safe, and energy-saving transportation solutions.

Innovative Marketing Methods

After its launch, Mercedes-Benz Trucks attracted widespread attention in the Chinese logistics and heavy truck industries, partly due to its experiential test drive events that were scene-based and tailored to the practical transportation needs and scenarios of customers.

Additionally, Mercedes-Benz Trucks introduced a new communication theme called "Switch to Mercedes-Benz for a Try." It encouraged customers to replace their existing brand with a Mercedes-Benz Truck, run the same routes for comparison, and see if the Mercedes-Benz Truck could bring more value to them. Mercedes-Benz Trucks' test drive activities follow five principles: real vehicles, real goods, real people, real cargo, and timely. Only under such genuine conditions can the fuel consumption and performance of Mercedes-Benz Trucks be accurately evaluated.

Mercedes-Benz Trucks' test drive events cover different routes across the country, with distances of over thousands of kilometers, such as from Beijing to Kunming, Beijing to Urumqi, and Shanghai to Urumqi. Throughout these long-distance round trips, customers can experience firsthand the comfort, safety, and fuel efficiency advantages of Mercedes-Benz Trucks. This scene-based approach also showcases the technological capabilities, performance, economy, and brand value of Mercedes-Benz Trucks, allowing customers to have a comprehensive and profound understanding of the brand.

Furthermore, to accurately target customer groups, Mercedes-Benz Trucks organized exhibitions in logistics parks. By bringing the trucks into logistics parks and collaborating with dealers, Mercedes-Benz Trucks can communicate closely with end-users.

Service Network Development

The coverage of after-sales service networks, response speed, and how customer service handles repairs constitute the "Iron Triangle" for truck manufacturers to enhance customer loyalty through after-sales service. The manufacturer's service philosophy, core values, and culture are conveyed to users in every interaction. In this process, the manufacturer can create greater value for the brand. When customers need to purchase vehicles again, their experience with after-sales service will have a decisive impact.

After localizing Mercedes-Benz Trucks, many improvements were made in after-sales service to address past pain points associated with imported brands, such as inadequate network density, difficulty in obtaining spare parts, and higher costs. The specific improvements include:

Increasing service outlets to cover major logistics hub cities nationwide. Mercedes-Benz Trucks plans to reach 100 4S stores and 50 2S stores by 2023, thereby reducing service radius, improving service efficiency, and response speed.

Establishing two parts center warehouses in Beijing and Ezhou and utilizing air logistics for urgent parts delivery within 24 hours to over 60% of cities nationwide and within 48 hours to over 98% of cities, thereby ensuring parts supply and avoiding vehicle downtime due to parts shortages.

Publicizing parts prices and implementing one-code anti-counterfeiting management for parts, achieving visibility and transparency in parts logistics, enabling customers to purchase genuine parts with peace of mind, and also supervising inventory management and consumption at service stations.

Additionally, Mercedes-Benz Trucks reduced service labor fees and introduced service contracts, allowing customers to enjoy professional Mercedes-Benz Trucks services at lower prices. The company also conducted systematic training for service personnel to improve their technical capabilities and service quality.

Competition Strengthens Century-Old Brands

In 1923, the first batch of trucks equipped with diesel engines, the Mercedes-Benz 1C, was introduced. This truck featured the OM5 four-cylinder engine with 45hp power, a top speed of 40 kilometers per hour, and a load capacity of 5 tons. This truck marked a breakthrough in the truck industry with diesel engines and also earned Mercedes-Benz a strong market presence and reputation.

One hundred years later, in 2023, Mercedes-Benz Trucks began comprehensive localization production in China. This move not only caters to the demands of the Chinese market and customers but also contributes to enhancing Mercedes-Benz Trucks' competitiveness and influence globally. Specifically, Mercedes-Benz Trucks' localization in China can bring benefits in several aspects:

Firstly, attracting talent in the automotive industry: China is the world's largest producer and consumer of automobiles, with several internationally competitive automobile manufacturing enterprises and professionals. Localizing the production of Mercedes-Benz Trucks in China can attract and nurture more automotive industry talent, covering various fields such as design, engineering, management, and marketing. Additionally, Mercedes-Benz Trucks can establish closer collaborations with domestic partners, universities, and research institutions to facilitate more technology exchanges and talent development, providing support for Mercedes-Benz Trucks' global development.

Secondly, optimizing supply chain efficiency: Producing Mercedes-Benz Trucks in China can lower costs, enhance price advantages, and improve market responsiveness. It also allows customization and differentiation of products based on the specific demands of Chinese customers. Furthermore, local production reduces dependence on imported components, lowering transportation costs and risks while shortening supply cycles and enhancing adaptability to market changes. Leveraging the strengths of domestic suppliers, Mercedes-Benz Trucks can undertake more localized customization and innovation to meet the diverse needs of Chinese and other regional customers.

Thirdly, enhancing product adaptability and safety: China's extensive road freight transport network presents various challenges with different road grades, terrains, climates, and seasonal variations. These demand higher performance and safety standards for freight vehicles. Localizing the production of Mercedes-Benz Trucks in China enables more product testing and optimization based on actual market conditions and customer feedback, thereby enhancing product adaptability and safety to meet the transportation needs in different roads and regions.

Fourthly, promoting technological innovation and leadership: China's road freight transport industry is facing challenges and opportunities in terms of transformation, upgrading, and green development. It requires continuous improvement in transportation efficiency, cost reduction, and pollution reduction. Localizing the production of Mercedes-Benz Trucks in China allows better utilization of Daimler Trucks' global technological resources, introducing the latest technology platforms and solutions to provide advanced truck products for Chinese customers. Simultaneously, Mercedes-Benz Trucks can conduct localized research and development and customization based on the specific characteristics and demands of the Chinese market, driving innovation and upgrades in areas such as energy conservation, environmental protection, intelligent connectivity, and autonomous driving.

Fifthly, expanding after-sales network coverage and service capabilities: China's vast territory and regional differences in economic development, population distribution, and transportation demand pose varied requirements and challenges for the use and maintenance of freight vehicles. Localizing the production of Mercedes-Benz Trucks in China enables better understanding of the characteristics and demands of the Chinese market and customers. Accordingly, it allows the establishment and improvement of after-sales networks covering all provinces and cities nationwide, providing timely, professional, and attentive after-sales services to ensure the operational efficiency and satisfaction of customers. This valuable experience can also contribute to the establishment of after-sales service networks in similar countries or regions worldwide.

Lastly, enhancing brand influence and reputation: Producing Mercedes-Benz Trucks in China showcases Daimler Trucks' confidence and commitment to the Chinese market and manufacturing. It also allows leveraging the experiences and feedback from the Chinese market to elevate the quality and standards of its global product lineup. Moreover, fostering win-win development with Chinese partners, including suppliers, dealers, and service providers, enables the sharing of technology, resources, and markets, creating more employment opportunities in Chinese society.

Conclusion

The localization production of Mercedes-Benz Trucks in China reflects Daimler Trucks' confidence in the Chinese market and manufacturing capabilities and represents a crucial element in Daimler Trucks' global strategic layout. Through local production, Mercedes-Benz Trucks can better meet the needs of Chinese customers, offering more competitive and valuable products and services. It also promotes technological progress and quality improvement in the Chinese automotive industry, creating more employment opportunities and social value for Chinese society.

This serves as a valuable lesson for other international brands as well. In a vast and diverse market like China, international brands need to operate with differentiation, catering to the unique characteristics and demands of the Chinese market by providing more diversified and personalized product choices. Additionally, a focus on localized research and development and innovation is essential, along with establishing closer collaboration with domestic partners, suppliers, dealers, etc., to achieve mutually beneficial development.