Mercedes CEO says intense China competition is "a new reality"

Investing.com -- Mercedes-Benz Group AG Chief Executive Officer Ola Källenius said the intense pricing competition in China's car market will continue for years.

Chinese brands are spending an "enormous amount of money" to enter the country's luxury car segment and compete with Mercedes models like the S-Class and the G-Wagon, Källenius said at an event near Helsinki, Finland.

"That competitive intensity in China — I don't believe it's going to go away anytime soon," Källenius told reporters. "It's a new reality."

Chinese manufacturers led by BYD Co. have taken control of the electric vehicle market in the world's largest auto market, creating intense pricing competition through rapid new model launches. Mercedes has seen sales decline along with Porsche AG, BMW AG and Volkswagen AG's Audi, which are restructuring to become more efficient.

Adding to the woes, China's luxury car market has contracted due to a property crisis that has affected high-value purchases. In the top-end segment that includes Mercedes' AMG performance models, the German brand still "dominates," Källenius said.

The CEO traveled to Finland to present the new GLA, a compact sport utility vehicle designed to increase sales in the lower end of the company's lineup.

Mercedes will offer the SUV in multiple drivetrains, including a fully electric version with up to 657 kilometers of range. German orders open Thursday, with prices starting around €48,600.

Mercedes reported this week a 30% second-quarter sales drop in China and announced more cost cuts, particularly in Germany. Källenius said in Finland that the decline was similar to the slump in China's overall market. Mercedes is managing pricing in China "as carefully and financially sound as we can."

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