What austerity drive? Wealthy Chinese undeterred as they flock to lavish auto show

PUBLISHED : Sunday, 20 April, 2014, 6:33pm
UPDATED : Sunday, 20 April, 2014, 6:33pm

China’s desire for luxury cars remains undimmed by an economic slowdown and political austerity drive as the country’s growing band of wealthy motorists set their sights on high-end wheels.

In a lavish event off Tiananmen Square, ahead of the opening of the Beijing Auto Show on Sunday, bejewelled models dressed in haute-couture graced the unveiling of Rolls-Royce’s Pinnacle Travel Phantom.

The new edition of its flagship luxury sedan, which comes in a two-tone dark red and silver, boasts intricate marquetry in its interior, customised to buyers’ requests, a reflection of the expensive tastes of the country’s elite.

Mainland China is already Rolls-Royce’s biggest market in terms of sales, representing 28 per cent of the company’s revenue.

Despite the slowing pace of overall economic growth in China, the future still looks bright for the luxury brand, says the company’s chief.

“If you compare to (Rolls-Royce) growth figures we saw here two or three years ago, big double-digit numbers... we see that growth is slowing down, but I am still optimistic about the Chinese market in the medium to long term,” CEO Torsten Muller-Otvos said.

“The whole Chinese market has become a more mature car market and that was to be expected,” Muller-Otvos said.

Since becoming head of the Communist Party in November 2012 and China’s president in March last year, Xi Jinping has mounted an austerity campaign among top officials and a highly publicised crackdown on corruption, designed to rein in spending.

China’s business community has also suffered as growth figures stagnate - last month the country set an annual growth target of around 7.5 per cent, the lowest levels seen in nearly a quarter of a century after years of breakneck expansion.

“The economic slowdown, austerity campaign and crackdown on corruption have already created negative impact on the sales of superluxury vehicles,” said James Wu, auto expert at Ernst & Young.

“Bentley and Lamborghini reported (fewer) sales in China last year year-on-year,” he said.

However, Wu said the “more affordable” luxury cars have outpaced the growth rate of the auto industry as a whole, with three German companies at the helm: BMW, Daimler (Mercedes) and Audi.

The popular trio dominates the high-end Chinese market and enjoyed sales increases of 20 per cent (BMW), 18 per cent (Daimler) and 21 per cent (Audi) last year.

Audi, the sector leader, sold nearly 492,000 cars in China - its biggest market - and will this year surpass half a million, according to Audi chairman Rupert Stadler.

With officials bound by austerity measures, Audi can no longer rely on the tinted-black window crowd, and is turning to younger drivers, women and those buying their cars for leisure purposes.

“In the past, our customers were very much associated with the government, we had a majority of senior management,” said Dominique Boesch, president of Audi’s sales division in China.

“Now, over 90 per cent of Audi customers are private ones, a third are women, and 70 per cent are younger than 40 years old.”

The nation’s gilded youth is also the target of Japan’s Nissan, which has announced the introduction of a compact crossover model exclusively for the Chinese market.

China was the leading market for Land Rover and Jaguar last year, said group sales operations director Andy Goss.

“We still expect substantial growth on the Chinese market,” he added, with a new joint-venture plant due to open later this year.

Audi, as well as Jaguar Land Rover and other luxury brands, is aiming to push beyond its traditional base on China’s prosperous east coast to other more developing regions.

There is even a hint of such a strategy by Rolls-Royce: its 21st retail space opened in recently in the southwest, in Kunming. Four more are to follow.

Finally, the luxury used car market, still in its infancy in China compared with Europe and the US, is also being eyed by luxury brands such as Audi and Jaguar Land Rover, who both said they want to increase this segment amongst their dealerships.

With an ambitious new wave of consumers from a wider geographical area, China’s auto sector is motoring forward despite setbacks -- and if consultancy firm McKinsey is correct, by 2016 it will have become the largest car market in the world.