Daimler AG has launched construction of a new U.S. factory, a strategy that will shield it from tariffs and enable the German automaker to better compete in the burgeoning commercial van market.
The $500-million Charleston, S.C., factory will manufacture Sprinter vans under Daimler’s Mercedes-Benz division. It will employ 1,300 workers and create another 400 jobs for suppliers.
The automaker has not given a firm date on when the plant will open, but strongly suggested it will be late in the decade. It’s likely to produce another vehicle there.
Daimler believes U.S. production is crucial to improving its position selling commercial vans in North America.
Since launching the Sprinter in the U.S. more than a dozen years ago under the Freightliner truck brand, Daimler has struggled to duplicate the success it has had with the vehicle in Europe and other parts of the world. Daimler added a Dodge version of the van but discontinued that after it divested Chrysler Group in 2007. In 2010, it added a second channel for the Sprinter as a Mercedes-Benz, while continuing to sell the big van as a Freightliner.
The American version of the Sprinter currently is assembled at plants in Spain and Germany, then partially disassembled and shipped to Charlotte, where workers at a small facility put the vans back together. The complex process helps Daimler avoid a 25 percent U.S. tariff on commercial truck imports but still eats into its profit margin.
Once the new Charlotte assembly plant opens, Daimler will have “more flexibility with pricing,” said industry analyst Stephanie Brinley of IHS Automotive.
Although she does not expect to see major price cuts, it will allow Daimler to “take control of its costs. It also signals that the company does believe there is more opportunity for its specific approach to the commercial segment.”
Since the plant is not set to go online until late this decade, Daimler is taking more immediate steps to build up Sprinter sales.
Last week, it launched a new, lower-priced model for tradespeople. The Sprinter Worker has a base of $32,495, or $4,000 below the previous entry model. But that’s still more than the $30,960 starting price of the segment leader, the Ford Transit.
Mercedes is loading up its new model with a variety of features, including safety technology such as Crosswind Control and a backup camera, as well as its diesel engine. A comparable Ford model, according to the German auto company, prices out at more than $37,000.
By targeting contractors and other budget buyers, Daimler hopes to build momentum. Since the 2010 launch of the Mercedes Sprinter, sales have climbed from just 8,560 units to 28,521 last year, according to industry research firm Autodata Corp. That includes the vehicles still sold under the Freightliner name.
U.S. Sprinter and Freightliner van sales fell 3.3 percent to 13,089 in the first half of 2016 compared with the same period a year earlier, Autodata said. Ford Transit sales have jumped more than 36 percent to the 78,480 during the same period.
Daimler has a lot of work to do to catch its rivals.
For one thing, the brand has 386 dealers, just 12 percent of Ford’s showroom count. Then there’s the fundamental cost issue created by the tariff rules. Mercedes is taking a big hit to the bottom line by launching the Sprinter Worker – as well as the smaller Metris van.
The new plant is expected to open when Mercedes is ready to launch the next-generation Sprinter.
The new model is expected to have more drivetrain options for buyers, including an electric version.
The vehicle now comes only as a diesel, but a gas engine option would help Daimler gain traction in the U.S.
“Diesel sales of the Ford Transit have been less than 10 percent,” said David Sullivan, director of product analysis for the AutoPacific consulting firm. “By limiting Sprinter sales to only diesel, they are significantly limiting their potential.”