(Bloomberg) -- Newly minted Chinese millionaires have long demonstrated their status by buying big, expensive cars such as Porsche's Cayenne large SUV, one of the reasons that China is set to dethrone the U.S. as the luxury brand's biggest market this year.
But after a government crackdown on graft and conspicuous consumption, growth in luxury-car sales is slowing, and Chinese buyers are settling for less expensive models. That could spell an end to the gold rush for brands such as Porsche, BMW, and Audi, which have relied on China for about 50 percent of their global profits, estimates Sanford C. Bernstein.
"The enormous growth rates luxury carmakers like us have seen in China in recent years won't continue," said Porsche Chief Financial Officer Lutz Meschke. "We have to adapt to that."
Last year, Porsche sold nearly 47,000 vehicles in China, triple its sales in 2010. The Porsche Macan compact SUV will be a key model for Porsche as it aims to boost brand sales to 60,000 units this year.
But the Macan, which costs 558,000 yuan ($90,038), won't generate as much profit as the larger upscale Cayenne, which has a price tag of 972,000 yuan.
As China's luxury-car buyers grow more price-sensitive, Porsche equipped the Macan compact SUV with a four-cylinder engine, the automaker's first since the 1990s. The small motor cuts Chinese taxes on the car by 30 percent.
"The era of Chinese consumers simply going for the most expensive models is bygone," says Su Hui, a representative of the China Automobile Dealers Association. "Affluent people are becoming more low-key."
There are similar downshifts at other high-end marques. BMW began making the X1 compact crossover in China in 2012; Mercedes-Benz will build the rival GLA compact SUV there this year. These brands previously focused on extended-wheelbase sedans for their often-chauffeured Chinese customers.
"China is turning into a much more mature market," Audi CEO Rupert Stadler said in May. "Competition will intensify" as the anticorruption drive saps demand for luxury rides, he said.
China remains a lucrative market. The Cayenne's base price there is equivalent to $156,800, compared with a U.S. starting price of $58,300. Although a large part of that goes to import duties and taxes, there's still a hefty profit built into China sales.
Luxury carmakers can also count on China's wealthy classes to keep growing. Consultant Capgemini forecasts that the number of Chinese with more than $1 million in financial assets will increase at double the rate in North America through 2016.
They're also likely to buy luxury cars at a younger age. Porsche's average Chinese customer is 35, versus 53 in the U.S. Still, Sanford C. Bernstein analyst Robin Zhu says the days of "supernormal profitability" are over. On smaller cars like the Macan, "margins are lower than the big stuff."