Q&A: D/C sees annual growth rate of up to 8% in eastern Europe

Stuttgart. DaimlerChrysler AG has been preparing to expand into eastern Europe. Sales director Erich Jonscher spoke with Automobilwoche's Gerhard Mauerer about sales potential and his market strategy.

The expansion of the European Union toward the East is imminent. Many of your colleagues expect a rise in car sales as a result. How do you judge the growth potential of the new members' automobile markets?

We believe that automobile sales will be on a continuously positive upward trend. The annual growth rates will be between 6 percent and 8 percent. However, there will be big differences between the individual markets.

In your opinion, which of the eastern European states has the highest potential? And, which markets have no further potential?

The Polish, Hungarian and Slovakian markets have already grown a lot during the past few years. Due to the comparatively high number of autos, we do not expect any huge increases in those countries. Currently, Russia, the Ukraine, Slovenia, Croatia and Serbia are the most interesting. Romania -- a candidate for joining the EU in 2007 -- is also an interesting market. Russia -- this market is our focal point within eastern Europe -- and the Ukraine are the most important because they have a high number of inhabitants and therefore a high number of potential buyers.

What is the current size of DaimlerChrysler's automobile business in Russia and the Ukraine?

The ultimate figures are not as impressive as the growth rates. We sold approximately 3,500 vehicles in Russia in 2003. Our target is to reach the 6,000-unit mark within three years. In the Ukraine, we have more than doubled our unit sales to approximately 1,000 vehicles last year.

What is DaimlerChrysler's position within the individual eastern European countries regarding distribution?

It is generally a DaimlerChrysler strategy to handle sales through our own trading organizations. Under the condition that the individual market has a certain size so that it makes sense to handle the sales ourselves.

How did you get so far within the individual countries?

We started at a very early stage, during the mid-'90s, to prepare ourselves for the further opening up of the eastern European markets. We founded our first eastern European sales organization in Poland in 1995. The Czech Republic and Russia followed. By mid-2004 there will also be sales organizations in Hungary and Slovakia. In the remaining countries we are currently represented by independent general agencies. It is our aim, however, to operate independently in the medium term, as is the case today in western Europe.

Is it your aim to have DaimlerChrysler sales organizations in all eastern European countries?

Not necessarily. We have no intention to have our own sales organizations in very small markets with a low demand, such as some states of the former Soviet Union -- Turkmenistan, Uzbekistan, Kyrgyzstan and Kazakhstan. However, the plan is to consolidate the general agencies to work even more efficiently and more professionally.

Do dealers in eastern Europe already fulfill the same strict standards as the ones in western Europe?

That is one of the challenges we face in the coming months and years. However, we are on the right path. Some sales locations have already reached western European standards -- specifically, our outlets in Prague or Warsaw. Regarding the density of the dealer network, we still have big plans for eastern Europe. We are striving for western European standards in the long-term.

Does that also apply to DaimlerChrysler's market shares?

Certainly. Our market shares in the premium automobile segments have almost reached the levels of our shares in western Europe. With commercial vehicles, our market share is already higher today than it is in western Europe, excluding Germany, where we traditionally have a very high market share.

Where do you see your biggest challenges within eastern Europe in the future?

We need to establish more sales organizations. In the Ukraine we have already made the first steps in that direction. Then we need to expand our dealer network and continuously improve its quality. All that is necessary to further increase our market shares and vehicle sales.

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