Beijing auto show trains spotlight on China growth market | Business| Economy and finance news from a German perspective | DW | 25.04.2016
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Beijing auto show trains spotlight on China growth market

Global carmakers have gathered in the Chinese capital to show off their latest models, with competition in the world's fastest growing auto market heating up and SUV's getting much of domestic customers' attention.

This year, the flamboyant "Auto China" motor show brings together about 2,000 exhibitors from 14 countries, showcasing their latest automotive creations to an expected crowd of 800,000 visitors.

As the Chinese car market grew 4.7 percent in 2015, total sales reached 24.6 million vehicles, making it a crucial market for foreign manufacturers as well as domestic brands. That rate of growth, however, represented a decline from the 6.9 percent seen in 2014.

But Cui Dongshu, a senior official from the China Association of Automobile Manufacturers (CAAM), said he expected a pick-up in sales this year with growth in the region of 10 percent. The industry lobby group leader told the news agency DPA that an improving Chinese economy coupled with strengthening credit growth would give "rise to optimism."

International carmakers though, are less upbeat about a strong acceleration in China. Ford China chairman and CEO John Lawler told reporters in Beijing that the market was actually "slowing down."

"The market is really acting more and more like a mature market rather than an emerging market. It is part of a more competitive environment," he said.

German premium carmaker Audi has a strong brand position in China and has long been seen as a marque to aspire to by consumers. But it, too, was "feeling the pressure," said Joachim Wedler, president of Audi China.

"For sure, our competitors are trying to grab market shares from us, and some are successful. This is business, we have to struggle and fight," he told journalists, adding that pricing was quite obviously "getting tougher."

SUV sales hitting the gas

Slowdown or not, what seems safe to say is that Chinese drivers' lust for horsepower and status seems insatiable. Sales of SUVs, for example, surged 52.4 percent last year, CAAM figures show.

Robin Zhu, auto analyst at Sanford C. Bernstein in Hong Kong, said the primary reason for the boom was a "fairly primitive one."

"It's about people's desire to feel safe on the roads. Because [SUVs] are bigger, and in low-speed collisions, from a consumer psychology point of view, you'd rather be the one in the SUV," he told the news agency AFP.

China's roads have a reputation for being dangerous, with death rates remaining comparatively high because of inadequate rescue systems and poor treatment. Bill Russo, automotive chief of advisory Gao Feng in Shanghai, told AFP that the appeal of an SUV came from a feeling of "command" and the perception "you can deal with anything the road throws at you."

But while consumers in the US and other countries may be drawn by the image of SUVs going off-road in rough conditions, in China most of them are based on ordinary cars. Russo noted that the most popular SUV models in China were "small, car-based crossover types", with the vast majority boasting engines smaller than 2.0 liters. "They're economical SUVs, they're not big, gas-consuming environmentally unfriendly vehicles."

But the boom may not last, executives warn. "Even if now the SUV is popular, in the future there will probably be a change," said Toyota China head Hiroji Onishi, suggesting that minivans could see their appeal widen.

Luxury appeals

In Beijng, car industry executives also pointed to high-end growth potential among the affluent and relatively young elite. Hubert Troska, board member of German top-of-the-range manufacturer Daimler, said the average buyer of its Mercedes brand cars in the country was aged just 37.

"Premium customers in China are the youngest in the world," he told a news conference at the auto show. "They're internet savvy. We really want to be at the forefront of connectivity and telematics in this country."

Peter Fuss from business consultancy Ernst & Young told DPA that first-time Chinese buyers were especially willing to spend more for a car and that German premium carmakers remained "unrivalled favorites" for them.

Audi's distribution chief Dietmar Voggenreiter expects the premium-car segment to grow above the general market in China, saying first-quarter growth of more than 10 percent in the segment was encouraging. While in Europe around 20 luxury brands were currently competing for market share, it was only nine in China, he added.

uhe/cjc (AFP, dpa, Reuters)

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