By Ronan Glon
Thursday, Dec 8th, 2011 @ 5:06 am
 
Chinese consumers are increasingly turning to small luxury SUVs as alternatives to premium sedans. If these are imported, their prices go up and the brands' profitability takes a hit. To combat this, European companies are starting to produce their small SUVs locally.

Audi has been manufacturing the Q5 in China almost since its launch, BMW started X1 production very recently and now the first Mercedes-Benz GLK has rolled off of the brand's Beijing assembly line.

Currently the only version built is the GLK300, powered by a 245 horsepower 3.0 V6, but a smaller engine is expected to make an appearance before the end of next year. The CDI variants of the GLK will not be built in China as buyers there largely prefer gasoline-powered vehicles.

Chinese GLK production is part of a long-term plan for Mercedes. Dr. Wolfgang Bernhard, member of the Daimler Board of Management, said that "the start of our local GLK production in China exemplifies our strategy of global expansion of production close to the market. We are thus supporting our sales success in our regional markets also from the production side, an important contribution to the Mercedes-Benz 2020 growth strategy."

The ambitious growth strategy includes locally producing two-thirds of all Mercedes sold in China by 2015, but the German automaker has not specified precisely which models will be built. Currently both the C-Class and a long wheelbase version of the E-Class are built in Beijing for the local market only; none are exported.

Over the last 11 months, Mercedes has sold 168,940 cars in China (including Hong Kong), 29.9% more than the same period in 2010. As positive as that may sound, the German automaker is still lagging behind BMW and especially Audi.