The Chinese Luxury Market: A Two Horse Race, or Can Mercedes Move Ahead?

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china luxury auto sales 2012 The Chinese Luxury Market: A Two Horse Race, or Can Mercedes Move Ahead?

Audi has been the king of the Chinese luxury segment for as long as anyone can remember, Hong Qi might have had a brief look in on the segment in mid 90’s but otherwise Audi has ruled this roost constantly. Audi’s success comes from being the only real option in town when it came here with Volkswagen via the FAW-VW joint venture in the mid 90’s, their first product was an Audi 100 which then became an Audi 200 in V6 and 1.8T form. Government ministers at all levels as well as the brave private business owners that ‘jumped into the sea’ (a phrase describing starting your own business) in the late 80’s and early 90’s during China’s period of Opening and Reform under Chaiman Deng Xiao Ping’s reign became the main buyers of the four ringed products.

Audi have managed to understand the psyche of the Chinese consumer, firstly they targeted the government markets with lengthened products such as the Audi A6L and then they brought it down to family users and private business owners that wanted the length of the A6L but with A4 equipment levels, hence the A4L. BMW came to China to make cars in 2002 with its partner Brilliance with plants in Shenyang, the 3-Series and 5-Series were quickly localized but the range was expanded to include imported models that were quickly pushed into local production to bring the brand to a wider audience, see the BMW X1 one for such an example.

Mercedes started its car making business in China with Beijing Auto Industry Group (BAIC) in 2005, a powerful company with its seat at the heart of the national government. Did the locally produced E-Series manage to push the A6L out of favor? Not quite. Mercedes 2012 sales in China moved along by a mere 1.5% to 196,211 (inc Hong Kong sales), in the meantime BMW racked up a huge 40% sales increase with 303,169 units sold (326,444 when MINI is included) an increase of 39.7% and Audi cleared over 400,000 sales with the A6L being the best seller with 132,872 units sold alone.

The Chinese luxury market is clearly becoming a two horse race between Audi and BMW, BMW have caught up fast with the introduction of the new 3-Series which comes in both short wheelbase (a German import) and the domestically made long wheelbase version, the BMW X1 is also raking in sales (but not this year it seems). Next year the larger X3 SUV model is also expected to see Chinese production, giving BMW another tool in their ever increasing arsenal. Audi will introduce the Q3 into China via the new Foshan factory along with the A3 later this year as part of VAG’s plan to take on the lucrative Southern Chinese market where spending power is largely on par with Western Europe.

Mercedes in the meanwhile are lumbering along with the current C-Class and E-Class. The C-Class is woefully out of date when compared to the latest 3-Series and far too small for Chinese tastes, the E-Class had is also outgunned by the A4L and 5-Series but a facelift due in the next few months to bring it in-line with the rest of the world’s models. The GLK is now made in China, but with a 3.0L V6 and the rest of the competition making use of smaller 2.0T engines the GLK is not winning too many fans. So far this year the GLK sold 4678 units, Audi sold 13,535 Q5’s, the X1 seems to be unusually slow with just 2382 sold in January and February.  The B-Class was launched late last year but doesn’t seem to have gained much traction in the sales market, a 2.0T is due later this year along with the introduction of the much awaited CLA. The CLA will likely give the Mercedes brand a new impetus when it launches, presumably at the Shanghai Auto Show later this year and on the market shortly afterwards.

If Mercedes are going to succeed in catching up with BMW and Audi in the Chinese market as they have promised so often to do, they are going to have to understand the Chinese consumer. Firstly the GLK will have to drop its six cylinder engine in favor of a 1.8T or a 2.0T, secondly the CLA is going to have to find its way into production ASAP likewise for the B-Class, price both in the low 200,000RMB range and consumers will be fighting their way into the dealerships. Rumor has it the new mini SUV, the GLC is also heading to China in 2014 with the B-Class due to role down Beijing-Benz production lines in 2015 and a new C-Class in 2014 too, giving the impression that all is not quite lost for Mercedes but they do have a lot of leg work to catch up in the Chinese market.

About the author  ⁄ FrankF

Frank entered the automotive industry via his father's instructions. He grew up with cars around him, especially as his father was a major auto restorer, Frank's childhood was spent passing beers, tools and coffee to his father whilst he explained the ins and outs of engines. Frank now works in the Chinese car industry at a specific manufacturer.

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