Mercedes-Benz recently announced that it would make China its home away from home. The famed German manufacturer is investing more heavily in R&D in China. According to Mercedes-Benz, China is the new center of gravity of the automobile industry.

Mercedes already had a research and development center in Shanghai and will now open its new Tech Center in Beijing later this month. Daimler, which used to oversee Mercedes-Benz, first announced the new tech center three years ago. From a business perspective, it's easy to see why Mercedes made this move since demand in China is currently more than in the USA and Germany combined.

China is responsible for more than 30% of new car sales globally and has been the biggest market for new cars since 2009.

If you break the figures down further, it makes even more sense. Last year Mercedes sold 275,000 cars in the USA and 286,000 in Germany. Even with the ongoing pandemic, Mercedes-Benz's growth spiked by 12% in China. It sold a record 774,000 cars. The Chinese are particularly fond of the new A-Class Sedan.

Around 80% of the cars Merc sold in China were also made there. Beijing Benz Automotive is a joint venture between Mercedes and Chinese manufacturer BAIC. It currently builds the A-Class, C-Class, E-Class, EQC, GLA, GLB, and GLC. This plant is responsible for various China-only models with a specific array of features unique to the market. Mercedes-Benz recently unveiled a long-wheelbase version of the C-Class, for example. The all-new EQB, destined for introduction in the USA next year, will also be built in China.

Reuters spoke to people close to the new design studio and the brand's new strategy, though all declined to be named because they are not allowed to talk to the media. This could be a case of protecting intellectual property, but the insiders reveal that the new tech center is more than three times the size of the R&D center Mercedes first opened in China.

According to the sources, the Tech Center in Beijing is on par with Merc's research and development headquarters in Stuttgart, which means it can essentially test everything involved with vehicle development. The center allegedly has chassis test benches and testing facilities for different powertrains and NVH levels.

As part of the move, Mercedes-Benz is upgrading its Chinese design studio and is moving the entire operation to Shanghai.

According to the sources, the main reason for this drastic move is to keep up with other local EV startups. Chinese buyers are not brand loyal and are more than willing to hop to a different brand that meets their needs better. Geely also owns a ten percent stake in Mercedes-Benz, and the two manufacturers will be working closely together on EV powertrains.

"The expectations in China are for the in-car experience to be served by a localized digital services ecosystem, and such solutions must be conceived and built by people that live in China and truly understand the mobile internet," Bill Russo, head of consultancy Automobility Ltd in Shanghai, said.

Thanks to the $170 million upgrade, Mercedes will test new technology in China instead of sending it back to Stuttgart. As you can imagine, this saves a lot of time during the development process and will make Mercedes more competitive.