The long-awaited production of Mercedes-Benz sedans for the first time in China is to be delayed by more than half a year, reported China Daily on Wednesday.

DaimlerChrysler and Beijing Automotive Industry Holding Co (BAIC) gained approval from the central government to start production of Mercedes-Benz C and E-Class sedans in the capital in July 2005, said the Beijing Municipal Commission of Development and Reform.

The timing is much later than BAIC's original plan. The company said earlier the first Mercedes-Benz sedan would roll off the assembly line in Beijing in October or at the end of this year.

Mercedes-Benz sedans will be made at a new plant of the joint venture between DaimlerChrysler and BAIC with an annual production of 20,000 units, according to the Beijing municipal commission.

Total investment in the Mercedes-Benz project will amount to 140 million euros (US$178.6 million), in which both DaimlerChrylser and BAIC will control a 50 per cent stake.

DaimlerChrysler and BAIC have not commented on the delay.

Sources familiar with the matter told China Daily the main reason for the delay was a dispute between the two sides on sales networks for locally-produced Mercedes-Benz sedans.

DaimlerChrysler wants to build new Mercedes-Benz sales networks alone or on the basis of existing channels of imported Mercedes-Benz sedans jointly built with local partners, sources said.

However, BAIC says it hopes to use the existing networks of its joint venture with DaimlerChrysler, or Beijing Jeep, to sell Chrysler and Mitsubishi sport utility vehicles (SUVs), according to sources.

"Foreign automakers want to have a controlling say in sales networks in China as they are only permitted to have a maximum stake of 50 per cent in their manufacturing joint operations with local partners," said Jia Xinguang, chief analyst with the China Automotive Industry Consulting and Development Corp.

"DaimlerChrysler is likely to copy what BMW has done in China in sales networks for Mercedes-Benz sedans to be produced locally," Jia said.

BMW, which started production at its joint venture with China Brilliance Auto in late 2003, sells its locally-made sedans through networks for its imported vehicles, instead of partly using Brilliance's dealers for its own-brand Zhonghua sedans.

Mercedes-Benz now has 43 franchised sales and service stations in China and the number will increase to 50 at the end of this year, the company said.

In the first nine months of this year, sales of Mercedes-Benz sedans grew by 22 per cent year-on-year to 6,700 units on the Chinese mainland.

The company aims to lift its sales on the mainland to 50,000 units in the next five to 10 years, with half from local production.

At present, China's premium car market is mainly controlled by Volkswagen's Audi, which started production 10 years ago.

China Daily