Daimler AG's chief executive called the sputtering U.S. economic recovery the largest potential risk to the auto industry's strong outlook this year even as the luxury car maker expects to generate more of its profit and sales from China and other emerging markets.
Though fast-growing demand in emerging markets could propel auto industry sales to expand between 5 percent and 7 percent annually for some years to come, "the biggest risk is that the U.S. economy does not start [recovering] on a more consistent basis," Daimler Chief Executive Dieter Zetsche said in an interview.
The European debt crisis posed another threat and preserving and strengthening the euro-zone and its common currency was key to stable European economic growth, he said.
As European political leaders continue to wrangle over a new aid package for Greece, Mr. Zetsche was one of 50 chief executives of major German and French corporations that signed and published an open letter Tuesday in newspaper ads in Germany and France with the headline, "The euro is necessary."
In the full-page newspaper ad, the chief executives decried "populist demands"—particularly in Germany—that Greece or other countries be forced to quit the euro or split the euro zone in two, while calling for strengthening the rules that govern the euro.
Speaking separately, Mr. Zetsche warned that if moves to rescue Greece faltered, it could hit the financing sector in Europe and beyond, reported The Wall Street Journal. "We believe it is necessary to fight for the continuation of the euro and almost everything that helps in this regard," he said.
Despite Mr. Zetsche's caution about the U.S. and Europe, Daimler, like other German premium auto makers, earns an increasing share of its profit from emerging markets, especially China, where the Stuttgart, Germany, company is currently opening a new Mercedes-Benz dealership every week to keep up with booming demand.
Through May of this year, sales of Mercedes vehicles are up 62 percent in China compared to a year ago, versus a worldwide increase of 10.5 percent. The car maker already sold more of its high-end S-Class models to Chinese buyers last year than in the U.S. and Germany combined. Mr. Zetsche added that by 2015, China will have surpassed both countries as Mercedes's largest market.
"It's clear that [the industry's] center of gravity has shifted," he said. Daimler also is shifting more production to China of its mid-range E-Class and C-Class models. Next year, roughly two-thirds of those car sales in China will be built locally, compared to just one-third in 2010. Mr. Zetsche said Daimler will continue to strictly export the larger, and more profitable, S-Class to China, in part because of the cachet that imports continue to have among Chinese luxury-car buyers.
Despite concerns the Chinese auto market may cool due to inflation and increasing anti-congestion measures, such as car registration restrictions, Mr. Zetsche predicted steady Chinese growth in premium car sales and said that so far Chinese government authorities had proven to be "masters" at keeping the economy from overheating.
