European carmakers have outperformed in the automobile market in China. Provided to China Daily

European companies reap dividends as demand for high-end cars increases in China

Automobile sales in China grew at their fastest pace in five months in August, with European carmakers making considerable headway in a robust market that posted growth of more than 10 percent.

Last month, more than 1.22 million passenger cars were sold in China, including sedans, multi-purpose vehicles, sport utility vehicles, and minivans, according to figures released by the China Association of Automobile Manufacturers. The sales numbers also represent a year-on-year growth of 11 percent.

Cumulative vehicle sales during the eight months reached 9.95 million, a year-on-year increase of nearly 8 percent. Sales of commercial vehicles, however, fell by 8.9 percent to 2.5 million, largely due to the slowdown of the Chinese economy and cancellation of many major projects since last year. SUVs continued to be the mainstay of the auto market in China and notched up a 30 percent growth in sales to 1.27 million units.

FAW-Volkswagen, German auto major Volkswagen Co's passenger car joint venture in China, took the pole position in August sales with 114,700 car deliveries, followed by SAIC-GM and SAIC-Volkswagen with 109,800 units and 87,900 units.

The top 10 auto manufacturers also accounted for more than 70 percent of the total market share with 593,000 deliveries, according to the CAM figures.

Volkswagen Group delivered 83,406 cars in August, up by 15.5 percent year-on-year. By the end of August, the company had sold more than 636,840 cars, 12 percent more than the previous year, while its Chinese joint venture partners FAW-Volkswagen and SAIC-Volkswagen were the leaders in the overall Chinese auto market.

Figures released by Mercedes-Benz show that the brand sold 134,810 cars during the eight months in China, up by 9 percent year-on-year.

"With more B-class models slated to be introduced in China this year, Mercedes-Benz hopes to maintain the good sales momentum," says Klaus Maier, chief executive officer and president of Mercedes-Benz China.

BMW remained on the high perch among European brands, as well as in the premium car market. With total deliveries of over 25,400 units (with around 23,500 BMW and 1,900 MINI), BMW had its best August ever in the Chinese market. The sales numbers represent a 37.5 percent growth over 2011.

Audi AG, another major premium brand of Volkswagen group, sold 34,800 cars in China, a year-on-year increase of 24 percent, while sales during the eight months rose by 33 percent to 261,548 units.

With the government gradually implementing stricter environmental standards, European auto brands have also started to adjust their product lines in China. Audi has been the spearhead in introducing new energy vehicles. Earlier this year, it introduced a model Q5 hybrid quattro, which claims to save up to 23 percent of energy compared with gasoline-powered vehicles.

Yao Chunde, professor from State Key Laboratory of Engines at Tianjin University, says it is better for auto majors to incorporate the new energy features in the high-end models now, as the target customers in this segment are not so sensitive to prices.

"Customers looking for vehicles priced higher than 200,000 yuan ($32,000, 24,600 euros) tend to be more environmentally conscious and they value renowned international brands more," Yao says.

Due to the high research and development costs, energy-saving vehicles, especially electric vehicles, need to be priced higher than other models, a factor that has dragged on sales.

Richard Wang, marketing manager of China Automobile Trading Co Ltd, says European brands have been the major gainers from the soaring demand for luxury vehicles from the middle class.

"The Chinese market has showed signs that premium brands are growing much faster than the mid to low-end ones," Wang says. "A large portion of European brands, such as Mercedes Benz, Audi and BMW, fall in this category."

Quick response to the government policy is another reason for European brands' success in the Chinese market, he says.

"As they have already accumulated good experience in new energy technologies, they can easily transform this knowledge into their product design, and then switch their direction to meet the government requirements."

He says Audi and BMW have already shifted market focus to lower emission models and the new Mercedes-Benz B-class has also adopted the 1.6 L engine.

The success for foreign car brands has, however, squeezed the room for local brands. Over the eight months, sales volume from local brands, which accounted for 40.3 percent of the total passenger car sales, declined by 2.4 percentage points over the same period of 2011. In contrast, during the same period, German brands increased their market share by 2 percentage points.

Analysts believe local brands will continue to have a tough time as joint-venture brands are now reaching out to the lower-end markets, which used to be the mainstay for Chinese brands.

Rao Da, secretary-general of China Passenger Car Association, estimates that September will be a better month for auto dealers as some favorable policies are slated to come up in the next two months.

The Chinese government issued a policy last month exempting passenger cars with less than seven seats from tolls during major holidays, which will come into effect in October.

China's economic growth is expected to bounce up mildly during the third quarter, which is also a good sign, as the auto market is closely related to the macro-economy, Rao says.

But he adds the growth rate of the auto market may not be that impressive as last year, when consumers rushed to buy cars before the government subsidies for energy-saving cars expired.

wangchao@chinadaily.com.cn

(China Daily 09/14/2012 page20)