Luxury Car Sector Continues To Thrive in China

New Models, Stimulus Package Continue To Drive Growth In World’s Top Automotive Market Despite Global Woes

China is one of Audi's most reliable and profitable markets; As Chinese luxury auto brands emerge, will they retain their dominance?

China is one of Audi's most reliable and profitable markets; As Chinese luxury auto brands emerge, will they retain their dominance?

The sustained growth seen in the Chinese automotive market over the last year has shown that the vast Chinese market — vast both in size and in potential customers — still has plenty of room to grow. For luxury carmakers, who’ve had a tough year in markets like North America and Europe, recent figures that show Chinese buyers are still motivated to part with their cash are welcome, to say the least, as formerly reliable customers in the US and other major economies think twice before signing on the dotted line.

According to this Wall Street Journal Asia article, growth in the Chinese market has been unprecedented in recent months for foreign luxury automakers, and with the stimulus package — aimed at infrastructure projects — taking effect, companies like Audi (a favorite of China’s government elite), BMW (the flashy entrepreneur’s choice) and Mercedes (the mark of a true “sophisticate” in China) expect to see their fortunes continue in the years ahead:

Audi’s sales in China rose 37% in September from a year earlier to more than 15,000 cars, marking a new record level in terms of monthly vehicle sales, the Ingolstadt, Germany-based auto maker said.

In the January-to-September period, Audi’s sales totaled 108,859 vehicles in China, up 20% from a year earlier.

Audi ranks third behind BMW and Mercedes-Benz in terms of global sales, but is keeping a firm grip on pole position in China, partly thanks to an early market entry of parent Volkswagen.

Audi is “on course for a new record year” in China, said executive board member Peter Schwarzenbauer. The company wants to win over more Chinese customers by expanding the range of locally built cars, such as the Q5 small sport-utility-vehicle.

Despite concerns that sales may taper off somewhat after the Chinese government’s tax incentives expire at the end of this year have been shrugged off by many luxury car executives, who feel the Chinese market’s capacity will sustain their sales long after 2009 has ended:

Daimler Chief Executive Dieter Zetsche told reporters last month at the Frankfurt auto show that the global premium market might reach the level of 2008 again in 2011 after the steep downturn, with China playing a crucial role as part of a broader geographical shift toward growth markets in Asia.

Mr. Zetsche said in an interview last week that Mercedes-Benz could ramp up production in China by accessing the entire capacity of its former alliance partner Chrysler Group LLC, following the end of the joint operations with its former U.S. unit. The Chinese joint venture had annual production capacity of 25,000 Mercedes-Benz cars and around 75,000 Chryslers.


Market Analysis