China Economic Review: Car market competition moves up to luxury brands
26/1/2005 16:46
China's luxury sedan market is expected to see fierce competition in 2005
as more auto manufacturers are vying for a share in the emerging and lucrative
market. "Auto giants are set to rival with each other for the country's
premium car market in 2005, " said Li Wu, general manager of the sales operation
of FAW-VW, based in Northeast China's Jilin Province. German luxury car
brand, BMW, one of the major rivals to Audi in the Chinese market, cut the
retail prices last week for its three and five series sedans by 12 or 13
percent, with a decrease of as much as 100,000 yuan (US$12,048) for BMW
530i. Experts in Beijing projected that starting from 2005, the country's
luxury car market will be diversified with more and more premium sedans of top
foreign brands to be produced locally. China's luxury sedan market, which now
has three locally- produced premium auto brands, Audi, BMW and Nissan-Teana, was
hardly optimistic in 2004 due to restrictions such as price, consumption market
and bank loans, as the sales of China-made premium sedans saw a decline against
the backdrop of 13.2 percent growth in the country's sedan sales. Audi
maintained the dominance of China's locally-made premium sedan sector in 2004 by
selling 50,900 cars from January to November while BMW and Nissan-Teana
respectively sold 8,300 and 2, 936, according to statistics released by the
China Association of Automobile Manufacturers. In the past few years, the
price for car import license has been pushed so high that import premium sedans
were stunningly expensive. Thus locally-produced Audi, due to its price
advantage, saw a steady expansion in the output and sales. However, Audi has
lost its price advantage due to the steady decrease in the price of imported
luxury sedans in 2004, as a result of the successive introduction of
locally-made BMW and Nissan-Teana and scheduled removal of import quotas at the
end of 2005. Audi in 2004 experienced a significant decline in sales despite
a large price. Also the sales of locally-made BMW and Nissan-Teana were also far
from optimistic. The country has a huge potential market yet to be tapped.
Luxury sedans are supposed to account for 8 percent of the total auto market in
line with international standards, so that sales of middle-grade and premium
sedans on the Chinese market are estimated to hit 170,000 units in this year's
2.3-million-unit market, compared with last year's total sales of less than
70,000 units. More and more auto manufacturers are joining the country's
premium auto market in a bid to grab the fast-growing market. In 2005, at least
six top auto brands including BMW, Benz, Toyota- Crown, Cadillac, Buick and
Nissan-Teana will challenge Audi's dominance in the country's luxury sedan
market. GM, the world's leading auto giant, is set to introduce China- made
Cadillac CTS to China early this year with the debut of Cadillac CTS priced at
518,000 yuan (US$62,409) in August 2004. Shanghai GM launched on Dec. 17 the
Buick Royaum, a luxury executive sedan, and plans to first introduce in March
Royaum GL2. 8 and Royaum GS3.6 into dozens of local markets such as Beijing and
the commercial hubs of Shanghai, Guangzhou and Shenzhen. Daimler Chrysler is
expected to raise the output of Benz E and C-class sedans to 25,000 units this
year and is scheduled to put into operation a new workshop located in Beijing
Yizhuang Economic Development Zone in July 2005. Japanese leading auto
manufacturer Toyota Motor Corp has stepped up the efforts to increase its
presence in China's auto market. The auto giant, in cooperation with FAW, is
expected to introduce Toyota-Crown to China this year. Nanjing Fiat plans to
introduce and produce LANCIA-Thesis, the flagship luxury sedan of well-known
European top auto brand LANCIA. Experts say the price of premium sedan will
inevitably drop as more premium auto brands tussle over the market shares, which
as a result will put greater pressure on small and medium-sized auto
manufacturers and shake up the middle and low-price-level sedan market. There
still remains a piece of puzzle where China's auto market goes in 2005. But one
thing is clear, auto manufacturers have rolled up their sleeves and braced
themselves up for market challenges.
Xinhua
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