Twenty years ago China’s roads were a sea of locally made vehicles, motorbikes and pedal bikes. The country’s car market has flourished since then, attracting huge investment from domestic and foreign firms. In the past decade, the number of cars sold has rocketed from around 2 million to nearly 20 million a year. While this boom was fuelled by sales of cheap local vehicles, the luxury car market has also taken off. Most of the major luxury brands see China as their fastest-growing – and often the largest – market. British brand Jaguar Land Rover (JLR) is one such example. From a small presence a few years ago, 2014 saw the opening of its first manufacturing facility in China. The award-winning Range Rover Evoque will be the first model to be built under the first Chinese-British automotive joint venture, with Chery Automobile. “The opening of this world-class facility is an important milestone for Jaguar Land Rover,” CEO Dr Ralf Speth said at the plant inauguration. “Since its launch, one in five Range Rover Evoques have been sold in China. Our decision to manufacture the Range Rover Evoque in Changshu is a result of our commitment to bringing more Chinese vehicles to Chinese customers.” JLR sold more than 100,000 vehicles in China last year, making it the firm’s largest single market. Despite high import taxes, China’s largest cities are awash with Ferraris, Lamborghinis, Bentleys and other top models. Bugatti has even sold a number of its Veyron hypercars in China, which cost from 25 million yuan (HK$31.5 million) to 38 million yuan each – the iconic brand also has its only museum in China. JLR isn’t alone in looking to ramp up capacity in China. Daimler and JV partner Beijing Automotive Group are spending US$1.37 billion to double Mercedes capacity at their Beijing plant – part of a 4 billion yuan package of spending. “We are deeply rooted in China,” said Daimler CEO Dieter Zetsche. “The Chinese automobile market continues to have great potential. We want to participate in this growth.” GM is ramping up production capacity by 65 per cent between now and 2020, and VW Group is investing more than US$2.5 billion in two more assembly plants. However, there is a growing concern that the influx of foreign luxury vehicles is detrimental to domestic brands. The China Association of Automobile Manufacturers says Chinese brands will be “killed in the cradle” if the government permits foreign carmakers to become more independent of their domestic partners. The government responded by placing further restrictions on car manufacturing in its updated Investment Catalogue, ruling that joint ventures are the only way for foreign firms to manufacture complete vehicles in China. Antimonopoly probes from Chinese regulators into the cost of vehicles and spare parts led to Volkswagen AG’s Audi, BMW AG, Daimler AG’s Mercedes-Benz, Tata Motors’ Jaguar Land Rover, Fiat SpA’s Chrysler, Toyota Motor Corp and Honda Motor Co announcing price cuts. Despite attempts to reduce the advantages enjoyed by foreign brands, investment continues because the market is so huge. Consumers are even more likely to buy vehicles, given the price cuts. There is also a realisation that such partnerships with Chinese firms – while creating competition for domestic brands – offer a way for China’s car manufacturers to improve their business practices and technologies. The partnerships suit foreign firms because they reduce the need for Chinese firms to copy foreign brands – even if the recent case of the Land Wind X7, a similar-looking vehicle to the Land Rover Evoque, shows that problems remain. Demand for luxury brands in China means that investment will continue – not only in manufacturing capacity, but also in increased brand marketing and specific models catering to the Chinese market. Long-wheelbase models by Mercedes and Audi, and the China-only Lamborghini Murcielago LP670-4 SuperVeloce China Limited Edition, show how important the China market is.
