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Smooth road ahead for luxury vehicles

(China Daily)

13:26, April 26, 2012

Visitors at the 2012 Beijing International Automotive Exhibition on Wednesday, the first day the show was open to the public. [Photo/Xinhua]

China's luxury vehicle industry will maintain its momentum in the long run although the overall market has entered a period of stagnation, which indicates an industry upgrade in the world's largest automobile market.

According to the global financial services firm Morgan Stanley, in the first quarter, China's luxury vehicle sales surged 36.7 percent year-on-year to 130,416 units. The growth far beats the overall market's 3.4 percent decline and the passenger vehicle segment's 1.3 percent drop.

This strong market performance has helped China for the first time become the German luxury car brand BMW AG's largest market in the world. The nation became the top market for the German premium vehicle producer Audi last year.

BMW's first-quarter sales of 80,014 units showed a 36.8 percent growth year-on-year, while Audi reported total sales of 90,063 units, an increase of 40.5 percent.

Mercedes-Benz also saw its sales surge 24 percent in China in the first three months of the year. The company expects China to be its biggest market by 2015. Moreover, "China plays an important role in our 2020 strategy of regaining the top position in the world in all categories before this decade is out," said Joachim Schmidt, executive vice-president of sales and marketing for Mercedes-Benz Cars.

According to Schmidt, the lower level of personal vehicle ownership in China than in more mature auto markets like the United States and Europe is expected to result in the sustainable growth of the luxury vehicle segment in China over the next few years.

Furthermore, with the current lower percentage of luxury vehicles in China compared with developed markets, luxury vehicle increases are expected to outstrip that of the overall auto market. Statistics from Morgan Stanley show that luxury vehicles in the first quarter only occupied 4.1 percent of China's total automobile market.

Jia Xinguang, an independent Beijing-based auto analyst, said he believes the luxury vehicle sector in China will maintain high-speed growth over the next decade.

Seeing the potential, Dan Akerson, chairman and CEO of the US auto conglomerate General Motors Co, announced at the ongoing Beijing auto show that the company plans to bring two new Cadillac models to China, the brand's second-largest market, to compete with the well-established German brands.

The XTS luxury sedan and ELR luxury electric coupe will help expand the brand's model portfolio in a luxury vehicle market that increased 39 percent in 2011.

According to Akerson, the XTS luxury sedan, Cadillac's most technologically advanced model, will be manufactured and distributed in China by its local joint venture, Shanghai GM. It will go on sale at Cadillac dealers nationwide in the fourth quarter of 2012."China has quickly become the fastest-growing market for Cadillac. Last year, sales rose by 73 percent," said Akerson.

The global consulting firm McKinsey & Company Inc predicted that by 2015, China will have more than 4 million wealthy households, the fourth-largest number in the world, following the US, Japan and the United Kingdom.

The investment banking and securities firm Goldman Sachs Group Inc also forecast that the number of consumers of luxury goods in China will increase from 40 million to 160 million during the next five years. Moreover, 40 percent of this group's annual spending is on luxury vehicles.

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