China's luxury market will remain a bright spot despite slower growth
Country on track to pass U.S. to gain lead in premium car sales
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Daimler CEO Zetsche introduces the Mercedes-Benz Concept Style Coupe in Beijing. The concept previews a four-door coupe-styled version of the new A class premium compact car. |
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BEIJING -- Western automakers including General Motors Co., Daimler, BMW, Audi and PSA/Peugeot-Citroen are counting on China to maintain growth for their premium offerings, although they expect luxury car sales to rise at a slower pace amid higher fuel costs and a decelerating economy.
Forecasts have China's automobile market surging to 30 million vehicles a year by 2020 from last year's 18 million. Some industry watchers think volume could even reach 40 million.
Audi sales chief Peter Schwarzenbauer said China should surpass the United States to become the world's largest luxury car market by 2015. "We expect the premium segment to grow much more strongly than the overall market," Schwarzenbauer said.
"China has 304 cities with at least 1 million population and we have so far only add dealers in 187 of them. The premium market still has extremely good growth prospects. We're all still scratching the surface in China," Schwarzenbauer told Reuters on the sidelines of the Beijing auto show.
BMW and Daimler expect double-digit growth in China's premium car market this year, but at a slower rate than in 2011.
Daimler CEO Dieter Zetsche said the premium car market should grow 15-20 percent this year and Daimler's sales should at least match that rate.
BMW expects sales growth in China to climb by a double-digit percentage in 2012, said sales and marketing chief Ian Robertson.
"I expect the (Chinese premium) market to ease somewhat from the 30 or so percent last year, but there's still a degree of upside in the market," Robertson said. "Forecasters say that premium segment in China could double over the next 4-5 years. We have about 290 BMW dealers now and will open about 50 more in the next 12 months. That also includes third-tier and fourth-tier cities."
GM expects sales of its Cadillac models in China to match U.S. sales levels by 2015 or 2016, CEO Dan Akerson said. Cadillac sales in China grew 73 percent to more than 30,000 last year, and were up 20 percent in the first quarter over the year-ago period. Last year, GM sold about 152,000 Cadillac cars in the United States.
Akerson said GM planned to add one new Cadillac model in China each year through 2016. The XTS luxury sedan will be built in Shanghai starting in the fourth quarter of this year.
Incentives boost sales
China's economy expanded 8.1 percent in the first three months from a year earlier, the least in almost three years, as exports cooled and Premier Wen Jiabao waged a campaign to damp consumer and property prices. The slower pace of growth and stiffer competition prompted BMW, Daimler, and Audi to dangle steeper discounts in the world's largest automobile market.
"The message sounds a bit more cautious than before," said Juergen Pieper, an analyst with Bankhaus Metzler in Frankfurt. "Everybody understands that growth has been too high to sustain. I think the market will normalize to a more sustainable rate of growth."
Nissan Motor CEO Carlos Ghosn said some of its rivals' recent success in China was due to price discounting, a factor he said was holding back sales of the company's premium Infiniti brand. Ghosn said Infiniti grew 60 percent in 2011 but only 2 percent in the first three months of 2012, but added that Nissan would not join the discounting trend.
"The definition of a luxury brand is a brand for which you're ready to pay a higher price for what it represents," he said. "If you start to be a bargain, yes, you're going to have a boost in sales in the short-term but you're going to lose the luxury halo after a while."
PSA unveiled a sleek, large coupe-styled concept sedan at the Beijing show on Monday that prefigures a flagship model for the Citroen DS upscale sub-brand it plans to introduce to China starting on June 28, with an annual volume target of 200,000 vehicles within four years.
"I don't know whether this is the best moment to be launching or not, but it's still the world's biggest auto market," PSA's global marketing chief, Xavier Duchemin said. "And premium is still the fastest growing segment."
Duchemin said he is confident of finding enough investors for the DS sales network planned with local manufacturing partner Changan, even as rising competitive pressure on prices and dealer margins makes the task "a little more difficult."
Sources: Reuters and Bloomberg
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