A roundup of auto news coming out of China this week, from Audi’s push for more young drivers to Rolls-Royce’s expansion plans and FAW’s plans to revive the Chinese brand Hongqi.
Courting Younger Buyers, Audi Expands China Lineup
Though China’s auto industry has shown a recent slowdown in 2012, leading to no-holds-barred price competition among luxury automakers, Audi’s global sales chief, Peter Schwarzenbauer, said this week that he plans to maintain his company’s plans to double China production capacity to 700,000 vehicles by 2015. In order to make these plans make sense, Audi plans to expand its China dealer network to 300 by the end of 2012, up from 237 last year, and up to 400 next year. Said Schwarzenbauer, half of the new dealerships will be located in top-tier cities, while the rest will be in second- and third-tier cities throughout the country’s interior.
By 2015, Schwarzenbauer expects China to overtake the United States as the world’s largest premium market. Audi is China’s largest luxury brand on the strength of its long-wheelbase A4 and A6 models.
But the company’s product mix is starting to shift now that compact vehicles are becoming a hot growth segment in China’s luxury market.
To exploit this trend, Audi is building an assembly plant in Foshan to produce the A3. That plant will open in 2013.
“We are convinced that the compact segment will be extremely big,” Schwarzenbauer says. “It will be mostly younger buyers, and mostly entrepreneurs and well-paid employees. The Chinese luxury market is becoming more like North America and Europe.”
One interesting shift that we’re starting to see from the likes of Audi is a transition from catering to China’s wealthy, chauffeured executive types towards self-driving, performance-minded individuals. According to the automaker, around 70 percent of Audi owners in China drive themselves, while 30 percent are shuttled around by personal drivers. As such, Audi will likely put less emphasis on creating elongated models for China, going against the trend set by Mercedes-Benz and BMW in recent years.
Rolls-Royce’s China Rollout Gains Pace
Audi’s not the only luxury automaker looking to tap growing demand in inland areas. According to Beijing Business Today, the British ultra-high-end carmaker Rolls-Royce recently gained official certification to open three new dealerships this year, with five more expected to gain authorization by the end of 2012, which would raise the Rolls-Royce China sales network to 18 dealerships. As demand has faltered in established markets like Europe, Rolls-Royce has placed even more emphasis on China over the past three years, and continues to debut new models at the country’s auto shows. Rolls’ extended wheelbase Ghost had its world premiere at the last Shanghai Auto Show, while its extended wheelbase Phantom had its own moment in the spotlight at the recently concluded Beijing International Auto Exhibition.
According to Rolls-Royce, the production of a single extended wheelbase (EWB) Phantom requires over 450 hours of labor time and 60 craftsmen, with the embroidery on the car seats alone taking over three hours to finish.
With China officially becoming the world’s largest Rolls-Royce market last year, the automaker has been keen to expand rapidly in the country to keep up with competitors like Bentley. According to Rolls-Royce General Manager Marc Mielau, one of Rolls-Royce’s major selling points in China is the ability for potential buyers to virtually outfit a custom design via an official iPad application and through the growing network of dealerships.
FAW Hopes To Raise The “Red Flag”
We’ve heard a lot from China’s First Automobile Works Group Corp. (FAW) about its hopes for reviving the home-grown premium brand Hongqi (“Red Flag”) in recent years. But aside from the occasional press release, auto show appearance, or National Day parade, it’s been more talk than anything. But this October, the brand is slated to finally launch its luxury-segment H7, according to FAW chairman Xu Jianyi. As Xu tells China Daily this week, the new model will be Hongqi’s first hybrid sedan, “with core technologies developed by the company itself.” From China Daily:
According to the company’s development strategy for the Hongqi brand, the H-series sedan will target China’s booming high-end vehicle market, competing with German luxury brandsAudi and Mercedes-Benz.
Xu Xianping, general manager of the company, said during the recent Beijing auto show that other than the sedan, the State-owned enterprise will develop four other vehicle types for the Hongqi brand, including two sport utility vehicles, a multi-purpose vehicle for business use anda mid-size limousine coach for ceremonies and parades.
FAW’s Hongqi push seems to coincide awfully close to Beijing’s proposal to restrict government officials to driving domestic vehicles rather than the ubiquitous black Audis seen throughout China. As China Daily notes, if this plan goes through, it’s not only FAW’s Hongqi that stands to benefit from Audi’s loss; this February, the Ministry of Industry and Information Technology also included three Shanghai-brand car models in its new vehicle product list. The manufacturer, Shanghai Automotive Industry Corp (SAIC), said that it has included Shanghai-branded models in its product plans for passenger vehicles, a clear indication of the revival of its Shanghai brand.