BERLIN (Bloomberg) -- Audi AG's two decades of dominance in China may end as Daimler AG and BMW AG step up their challenge in the world's largest auto market.
BMW and Daimler's Mercedes-Benz, in a departure from their strategies elsewhere, will roll out new models at the Beijing auto show developed specifically for Chinese customers as they seek to steal business from Volkswagen AG's Audi.
Audi's market share has slumped more than 20 percentage points in the last six years in China, a country it is banking on to reach a goal of leapfrogging BMW and Mercedes to become the world's largest luxury carmaker by 2015. China is Audi's No. 2 market and the only country where it's the clear leader. Mercedes is the fastest-growing luxury carmaker in China.
“Mercedes and BMW have more upside than Audi in emerging markets, so it will be difficult for Audi to achieve its target,” said Arndt Ellinghorst, a London-based automotive analyst with Credit Suisse, who has “outperform” ratings on the three carmakers. The BMW and Mercedes brands have stronger appeal to wealthy consumers and their new models should boost sales at the expense of Audi, he said.
On Friday, Mercedes will debut a longer E class at the Beijing show, its first model developed only for China, while BMW will show an extended 5 series, the only car in its line-up built for a specific market. The longer vehicles are meant to appeal to wealthy Chinese buyers, who are typically chauffeured. Audi sells extended versions of three sedans in China and will show a new longer A8, first introduced in 2000, in Beijing.
Audi's China market share declines
Audi's share of the Chinese luxury market dwindled to 42 percent last year from 66 percent in 2004, according to data from Global Insight. BMW, the world's largest luxury carmaker, gained 7 percentage points to 23 percent over the same period, while Mercedes increased to 16 percent from 9 percent.
The drop in Audi's market share came after Daimler and Munich-based BMW established joint ventures over the last seven years to build cars locally. Audi has been present in China or more than two decades thanks to parent Volkswagen AG, the first overseas carmaker in the country, and is the biggest provider of government cars, accounting for 20 percent of sales. Mercedes and BMW were added to the government's purchase list last year.
Daimler's Chinese sales more than doubled in the first quarter, making it the fastest-growing luxury carmaker in the country. The Stuttgart, Germany-based manufacturer, currently No. 3 in China, is targeting deliveries of more than 100,000 vehicles this year, up from 70,100 in 2009.
Audi intends to defend its leading position and has plans to sell 200,000 cars in China in 2010, up from 159,000 last year. BMW delivered 90,500 vehicles in the country in 2009.
With so much at stake, all three carmakers plan to expand local production. BMW is enlarging its existing Chinese factory and building a second one for 560 million euros to more than double capacity to 100,000 vehicles. Daimler, the world's second-largest luxury automaker, currently has capacity to build 100,000 C- and E-class models at a Chinese plant.
“The potential of the Chinese market remains enormous, and our targets are correspondingly ambitious,” Daimler CEO Dieter Zetsche said last week.