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Supercars sold at a premium

By Li Xiaoshu (Global Times)

13:23, April 27, 2012

Imported premium vehicles in China are sold at prices much higher than those in the Western countries, largely because of dealers' windfall profits and speculative behavior amid slower economic growth, insiders and market watchers noted Thursday.

The comments came as a number of ultra-luxury cars showcased at the Auto China 2012 were sold out Thursday when the exhibition first opened to the public.

A customized ONE-77 supercar by British luxury sports car maker Aston Martin was sold for 38 million yuan ($6.03 million) after the company unveiled three handcrafted Dragon 88 China Limited Editions, Aston Martin confirmed to the Global Times Thursday.

However, the model's pricing in the US and UK only ranges from approximately $1.5 million to $2 million, according to a December 2011 report by American magazine Car and Driver.

Meanwhile, both a Vitesse super sports car made by French car manufacturer Automobiles E. Bugatti and a medium-sized Koenigsegg Agera R sports car by Swedish car manufacturer Koenigsegg were presold for around 40 million yuan each before the show's first public day, the Xinhua News Agency reported Thursday.

The two cars are separately priced from $2.5 million and $1.6 million, according to auto news portal emunds.com.

Luxury cars in China carry price tags that are double, and sometimes three- to five-times higher, the prices in the American and European markets, said Su Hui, vice president of the auto market division of the China Automobile Dealers Association.

China currently imposes 25 percent tariff, 17 percent value-added tax, and up to 40 percent goods and services tax on imported cars, according to the General Administration of Customs.

However, Su believes these are not the leading factors behind the relatively high prices of luxury cars in China; it is because of "the higher margins generated by dealers and official sales companies."

"Profits are expected to stand at a higher rate than 50 percent while the average margin of passenger vehicles in the country fell to less than 20 percent," Su told the Global Times. "Lucrative pricing strategies may trigger buyers' demand and investors' confidence in tackling the sluggish auto growth, but they could lead the industry onto an unhealthy and unsustainable path."

Varying prices and profits are quite common in all markets, according to James Chao, director of Asia Pacific research at IHS Automotive Consulting.

"China is not immune to the system of demand and supply," Chao told the Global Times Thursday. "Ultra-luxury cars are always appealing to the high-income bracket where people are less price sensitive."

The average supercar buyer in China is a 25 to 35-year-old male, according to Namrita Chow, an Analyst with IHS Automotive.

"The country's new rich like to show off grandeur and consider the most expensive as the best," Wang Liusheng, an auto analyst with China Merchants Securities, told the Global Times Thursday.

"Besides, they're driven to higher spending due to limited investment channels at the moment," Wang said.

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