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Luxury cars sell well in China

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Luxury cars sell well in China

Wealthy set pays cash for world's prestige makes

Michael Dunne / Special to The Detroit News

Chinese consumers are stingy savers and Americans are extravagant spenders. That is the prevailing consensus found in newspaper headlines these days. But a look at China's luxury car market tells a different story.

China's wealthy set will buy some 500,000 luxury cars and SUVs this year, up from only 98,000 five years ago. Three German makes -- Audi, BMW and Mercedes Benz -- and Lexus account for 93 percent of the market.

Volkswagen AG's Audi leads the pack with expected sales of 210,000 units this year.

China will account for more than one in two of all Audi A6L's worldwide sales this year. Audi benefits from its long history in China -- it began domestic production in the early 1990s -- and its continuous stream of high quality products.

Daimler AG's Mercedes-Benz enjoys the fastest clip of growth among the luxury brands, thanks to a surge in demand for the C-Class among China's youthful wealthy. In 2009, sales of the C-Class surpassed those of the S-Class for the first time. China is already the No. 1 market worldwide for the S-Class and the R-Class.

BMW expects sales to top 100,000 cars and SUVs this year, about the same number as Mercedes.

In China, BMW has built a reputation as a premium car for people who love the driving experience. BMW produces the 3 Series and 5 Series inside China, but still imports the 7 Series. The company is planning a capacity expansion that would enable production of 300,000 units a year by 2012.

Toyota Motor Corp.'s Lexus was caught wrong-footed in 2009 by a change in tax policy. The government introduced steep taxes on large engines and the Lexus pipeline was full cars with big power plants. Sales stalled at 30,000 cars -- flat with the year before. But the Japanese maker has recovered momentum and is now on track to sell 45,000 Lexus cars and SUVs to Chinese consumers this year.

General Motors Co.'s Cadillac, Honda Motor Co.'s Acura and Nissan Motor Co.'s Infiniti are also present in China. The three companies offer excellent products but they need to work harder on their brand appeal in China. Each recorded sales of less than 10,000 units in 2009.

If you are thinking luxury cars manufactured in China must be pretty affordable, think again. After taxes, the average luxury car retails for around $70,000. The popular Lexus ES, for example, ranges from $73,000 to $84,000.

And yet, the Chinese buyers keep coming with their checkbooks. More than 90 percent of luxury car sales are settled in cash. By 2015, Chinese demand for luxury vehicles will climb to 800,000 cars annually.

It is true that most Chinese consumers feel compelled to bargain over the charge for an oil change or a new set of wipers. But when it comes to buying luxury cars, they do not hesitate to open the purse strings.

From The Detroit News: http://detnews.com/article/20100729/AUTO01/7290347/1148/auto01/Luxury-cars-sell-well-in-China#ixzz0v4vVYS20

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