BEIJING – At age 32, Jason Jia already is the kind of customer luxury automakers are seeking as competition grows in China’s lucrative but crowded market.
The energy industry consultant has traded up from a Volkswagen Polo to a VW GTI.
As he stood looking at a Cadillac CTS at the Beijing auto show in late April, he said he wanted a Mercedes Benz or a BMW.
The engine needs to be turbo, said Jia, who has a budget of $80,000. Is that a lot of money? Cars over $48,000 are everywhere.
A few years ago, Jia’s options might have been limited to cars designed for an older American or European. But now, luxury brands from Mercedes and Infiniti Audi to Lincoln are racing to create smaller, sportier models for younger Chinese buyers.
They are trying to appeal to local tastes in everything from paint colors to the scent of dealerships and new vehicles.
The megatrend for us in China will be compact cars, said Martin Keuhl, head of corporate communications for Audi China. It’s not so status-driven in the sense that big is beautiful.’ Now you can have a good car that is small. Younger people also are more open to this.
Luxury automakers, like their mass-market counterparts, are looking to China to drive future growth and are investing heavily to gain or expand a foothold in its market. This year, while overall market growth is expected to cool to 8 to 10 percent from last year’s 15.7 percent, analyst Zhu Bin of LMC Automotive said luxury sales growth might accelerate from 21 percent to 24 percent.
New brands including Ford Motor Co.’s Lincoln are entering the market, adding to intense competition. Manufacturers are shifting production to China, allowing them to cut costs and compete on price as well as style.
China’s average customer is 10 to 15 years younger than in the West and buyers who increasingly drive themselves instead of having a chauffeur, automakers say.
Torsten Muller-Otvos, CEO of Rolls-Royce Motor Cars Ltd., owned by BMW AG, expressed surprise at how young some buyers are.
Many young customers (are) 28, 29, 30, and it is not inherited money. It is self-earned money. Very impressive, said Muller-Otvos.
Younger buyers, some of them already Ferrari drivers, are looking at Rolls’s two-door Wraith, he said.
This is truly a car for the self-drivers’ but much more comfortable than a Ferrari, and that is quite attractive here, said Muller-Otvos.
Smaller cars such as Audi’s sporty A3 in the $32,000-to-$48,000 range are particularly competitive, Zhu said.
The market is dominated by German brands Audi AG, BMW and Daimler AG’s Mercedes-Benz, which have a combined market share of 74 percent, but competitors are likely to eat into that, said Zhu.
The premium market should be more diverse, he said. Chinese consumers in the past have not had many choices.
At the Beijing Auto Show, people like Jia abounded.
Geng Yunning, a mother of a young child, said her family wanted to upgrade their domestic brand car to a better model ranging between $32,000 and $48,000.
If we can afford it, we will get a car that is more spacious, safer and more comfortable, she said, after visiting the BMW exhibition floor.
Han Minghua, an airline employee in his late 30s, is looking to replace his 6-year-old Honda.
It’s an entry-level car – a typical Asian car with a good fuel economy, but its mission has been accomplished, Han said. Our financial conditions are better than in 2008, and we wish for improvement in quality of life. His budget? $64,000 to $80,000.
Audi got its start in China 25 years ago producing limousines for the government but says today 90 percent of sales are to private buyers.
That is reflected in colors requested by customers, 60 percent of which are now orange, yellow and other light shades, according to Dominique Boesch, president of the Audi sales division at the company’s FAW-Volkswagen joint venture.
Audi’s plans one new dealership per week through 2017 and doubling the sales staff to 50,000 people. An employee training center it’s building in Beijing will be its biggest in the world.
GM is building a Cadillac factory in Shanghai and hopes to double the brand’s annual sales to 100,000 by the end of 2015.
Cadillacs sold in China are designed for local tastes with more attention to rear-seat comfort, said Joseph Y.H. Liu, a GM China executive.
Lincoln wants to reinvent itself in China, shedding its staid image at home and targeting younger buyers.