Luxury Car Sales Booming in China

By: Gregory Smyth

At the Beijing Auto Show organizers assigned 4,000 square meters of space for luxury cars, where top brands are displaying their new models.

Competition among luxury car brands in China is becoming more and more intense, with the latest indication of exciting times being the launching of Porsche AG's new showroom in Shanghai last week. Even though the European luxury brands spread over different price ranges, they all have the climbing number of affluent Chinese customers in their sights.

According to a survey conducted, the number of China's middle class, aged between 20 and 49 with annual incomes in the range of $8,000 and $27,000, will reach 100 million by 2016, an increase of 35 million from last year. Meanwhile, the nation has attained growth of more than 10 percent annually in gross domestic product over the past few years and has given birth to more than 300,000 millionaires in U.S.-dollar terms. According to the latest "rich list" made public in China, more than 500 people had assets of more than $100 million.

The market for luxury cars in China is not showing indications of backtracking. It is anticipated to grow 20 percent annually until 2008 and then at 10 percent per year until 2015, according to Ernst & Young. Freshers including Aston Martin, Lamborghini and Spyker are all struggling for new customers by taking part in auto shows.

On the second day of the show, a Rolls-Royce Phantom on display was bought for 6.6 million yuan (US$838,681) and a Bentley Arnage Mulliner sold for 6.48 million yuan, the Beijing Morning Post reported. Last year Bentley sold 64 cars on the Chinese mainland market. Among them 30 were Arnage models, with the minimum price 3.88 million yuan.

Statistics reveal that Land Rover, Jaguar and BMW also went through surging sales in China in 2005. Jaguar said sales in China increased by 220% in 2005 over the previous year. Land Rover sold 1,415 vehicles in the Chinese market, an increase of 107% year on year. Mainland China has become the fastest-improving market for BMW, which sold 23,595 cars in the country, an increase of 52.4%.

China imports more than 100,000 cars every year, most of which cost in excess of $40,000, according to customs figures. Import figures arrived at 147,000 cars, valued at $4.84 billion, for the first eight months this year, an increase of 56.1% and 71.8% respectively from the same period of 2005. The progress in unit price demonstrates that luxury cars are now a major import sector.

Analysts say that every year leading brands sell 20% of their output in Asia, with mainland China being the most lucrative market.

Some luxury-auto makers, including DaimlerChrysler, BMW, Audi and Volvo, have formed assembly lines in the country to benefit from lower production costs.

It has been predicted that, five years from now the Chinese market for luxury cars will develop to the point that sales will be progressing at an annual average rate of 60%.

Sale of luxury sports cars in China is booming, and the country is anticipated to be Ferrari's fifth- or sixth-largest market in three to five years. It is estimated that only 5% of Chinese can currently afford private cars, but that translates into 65 million people considering the huge population.

Vehicle sales are predicted to arrive at 7 million in 2006, including 4 million sedans and 320,000 luxury vehicles. The markets for luxury cars in China and luxury sports cars in China promise to be among the hottest in the new year.

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