Report: China Luxury Auto Sales To Overtake US By 2016

McKinsey & Co. Says 1.25 Million Luxury Vehicles Sold In China Last Year

The Porsche Macan is expected to prove extremely popular when it debuts in China next year

According to a new report by McKinsey & Company, China’s luxury auto market is set for a sustained rebound in the years ahead, with sales projected to more than double from 1.25 million in 2012 to 3 million by 2020. By 2016, the country is expected to surpass the US to become the world’s largest single market, with expected luxury auto sales of 2.25 million units per year.

In anticipation of the country eventually taking the top luxury spot — which has been all but a certainty since it became the world’s largest auto market in 2009 — major automakers have spent the last several years digging in their heels in mainland China. In addition to opening joint ventures with domestic partners, international marques have been busy expanding into less developed inland cities, reaching out to consumers via Chinese social media platforms, asking for netizens’ input on new models, and tailoring designs to the particular demands of the Chinese buyer.

Via Bloomberg:

Automakers from General Motors Co. to Nissan Motor Co. are expanding their premium brands to compete for luxury buyers in China, where German marques led by Volkswagen AG’s Audi account for about 80 percent of sales, according to McKinsey. Ford Motor Co. plans to start sales of its Lincoln nameplate in China next year, while PSA Peugeot Citroen is readying its flagship DS dealership in Shanghai.

“Even now, China’s premium car market presents a sizable opportunity for latecomers,” Sha Sha, Theodore Huang and Erwin Gabardi at McKinsey wrote in the report. “Japanese and U.S. attackers still have a chance to create a market footprint.”

Luxury car sales have increased 36 percent annually in the past decade, compared with the 26 percent rate for the total passenger-vehicle market, according to McKinsey. The segment remains attractive for automakers as 111 large Chinese cities still don’t have premium car dealerships, according to Morgan Stanley & Co.

Ultra-luxury brands like Bentley now see the Chinese auto market as "make or break"

As France24 adds:

China is already the world’s biggest auto market, with sales rising 4.3 percent year-on-year in 2012 to 19.31 million vehicles.

But slowing domestic economic growth, limits on car numbers by some cities and a political row between China and Japan that hurt sales of Japanese-brand cars weighed on the market last year.

McKinsey said income growth, confidence in the Chinese economy, willingness to pay for luxury cars and a desire to reflect social status were among the factors supporting the premium market.

Households purchasing a second car or upgrading from basic transport were a new factor in the market, it said.

“The fast rise of the newly affluent middle class and two-car families presents an intriguing opportunity for premium automakers,” the report said.


Market Analysis, Marketing