JD Power & Associates Predicts Luxury Auto Sales In China Will Double In Next Five Years
A roundup of recent stories from the Chinese automotive market, where sales continue to sizzle even as worsening traffic sends some city dwellers back to their bicycles:
Baojun, GM’s Newest China Brand, Unveiled In Liuzhou
Today, General Motors unveiled the first model from its new joint venture brand, Baojun, designed to lead GM’s expansion in the inland third- and fourth-tier cities that are expected to power the Chinese auto industry’s sustained growth. Built on the success of GM’s affordable Chevrolet Sail, which debuted in China last January and retails for as little as 56,800 yuan (US$8,552), Baojun is designed to compete head-on with lower-end models from domestic Chinese automakers like BYD and Geely.
While some observers are skeptical that GM really needs another nameplate, GM apparently feels the brand is necessary to compete with domestic Chinese automakers at a lower price point. As Terry Johnsson, VP of GM’s China operations, said in an interview, as first- and second-tier cities account for a smaller percentage of total sales, major automakers are looking to China’s less wealthy interior for serious growth. “Those big coastal cities are rapidly becoming less than a quarter of our business, and the real growth is in what we call tier three, tier four cities,” Johnsson told Reuters. “It wouldn’t be unexpected to see 60 percent of the business in tier 3 and tier 4 cities (in five years).”
As the Toronto Sun points out today, we can expect more top automakers to create new, lower-end brands for the China market with their domestic joint venture partners, which capitalize on the high-tech capabilities of the foreign brand as well as the low-cost manufacturing advantage of the local brand. Recently, Nissan Motor and its Chinese partner Dongfeng Motor Group unveiled a new brand, Venucia, that is designed and developed specifically for the local market. Look for several more brands to emerge in coming months and years in the same mold as Baojun and Venucia, as top manufacturers are enticed by the promise of the inland market. While incomes are far lower, it’s essentially a blank slate, in contrast to the increasingly saturated east coast markets.
FAW-VW: China’s luxury car sales will grow 70% in 2010
GasGoo writes today that Volkswagen’s China joint venture, FAW-VW Audi, has projected that sales of luxury cars in China should approach 700,000 units in 2010, a year-on-year increase of 70%. As Zhang Xiaojun, executive vice-president of FAW-VW Audi Sales Division said, “In recent years, the luxury car segment in China has been growing more than twice as fast as the other segments.” This type of significant annual growth is expected to continue for the foreseeable future, as JD Power & Associates recently predicted that luxury car sales in China will double by 2015.
To meet growing demand, particularly in smaller cities, automakers are stepping up production of China-only models with their local JV partners. From GasGoo:
Automakers who are no longer content with the slow gain from importing cars have stepped up their efforts in expanding local production. Audi and BMW are now building their second plants in China. Bejing Benz, a joint venture between Daimler AG and Beijing Automotive Industry Holding Corp, is establishing a new factory too. Besides, Lexus, Toyota’s luxury vehicle division that has always been selling imported cars in the Chinese market is also mulling construction of a new facility.
In terms of network expansion, Mercedes-Benz will double its network in the world’s largest auto market next year and complete its sales target of 1 million units in three years, Mercedes-Benz (China) said at the launching ceremony of the new A-Class held in Shanghai on November 18.
Hongqi To Begin Consumer Production Of HQE, China’s Most Expensive Home-Grown Vehicle
Hongqi (红旗, or “Red Flag”), for decades the preferred mode of transport for the Chinese Communist Party’s top leaders (and most notably seen at last year’s National Day parade), is set to take on the consumer market, as the company will soon begin volume production of its Hongqi HQE. Expected to retail for 8 million yuan (US$1.2 million) the HQE will be, by far, China’s most expensive domestically designed and produced automobile.
According to China Auto Web, the Chinese media have compared the HQE to the Maybach 62 and Rolls-Royce Phantom, though with a curb weight of 3200kg and 3900mm wheelbase, the HQE is noticeably larger and heavier than both.
Hopes are high for the Hongqi HQE, as this model draws less inspiration from foreign brands than its predecessors, and features the first Chinese-made ultra-luxury engine. Developed specifically for the for HQE by First Auto Works (FAW), the 6 liter V12 might not measure up to Audi’s V12, yet is a massive step forward for home-grown Chinese auto manufacturing.
Zhengtong Auto To Raise Up To US$554 Million In Hong Kong IPO
Dow Jones reports today that China Zhengtong Auto Services Holdings Ltd. plans to raise as much as US$554 million from an initial public offering ahead of a listing on the Hong Kong stock exchange on Dec. 10. According to a term sheet, the Hebei province-based Chinese auto dealer, which sells high-end brands including Audi and BMW in China, plans to sell 500 million shares in an indicative price range of HK$6.80-HK$8.60 each.