China is not just interested in cracking down on government corruption, it wants to promote domestic industry. In November 2011, the central government lowered the budget for routine official cars to 180,000 yuan – a cut of 28 percent. While this has become the status quo, the one major exception to this rule is China’s class of top officials, who have long preferred foreign cars for doing business.
With the growing surge of patriotism threatening to encroach even these elite officers, the company with the most to lose is Audi, whose A6L has long been a favored model.
Audi dominated the luxury car market in China with a 29.6 percent of the market last year, followed by Bayerische Motoren Werke AG at 23.6 percent, and Mercedes-Benz at 20.6 percent, according to IHS Global Insight.
China’s bestselling luxury car remains the Audi A6, which starts at 287,300 yuan. Comparatively, the SAIC Roewe 950 sedan, which was recently named the official car for the annual meeting of Sichuan province’s local political advisory body, starts at 149,800 yuan.
Audi is not taking any chances with its market position. Given China’s political and market shifts, Audi is set to transform its image from the preferred car of China’s political elite to the car of choice for China’s younger consumers.
Audi soared to the top of China’s market by targeting China’s elite politicians and business executives. Now, it has distanced its association with the government citing individual consumers account for nine out of every 10 of its customers.
The automaker has also taken steps to appeal to younger consumers. It unveiled its first interactive digital showroom in Beijing and has introduced sport-utility vehicles and sports cars like the TT and R8, according to Bloomberg.
Meanwhile, China hopes that domestic car manufacturers will finally get a boost.
Local automakers are eager to see policy change in their favor as they trudge through a market slump. According to the state-backed China Association of Automobile Manufacturers, the market for Chinese sedans and compact cars plummeted to 28.4 percent in 2012, a 4-year low. None of the top ten passenger cars last year was produced by a Chinese company.
“If the top leaders started to switch to Chinese brand cars, junior officials and bosses of state-owned companies would follow overnight and that would be a great push for state-owned automakers,” said Chi Yifeng, head of the Beijing Asian Games Village Automobile Exchange, a dealership in the capital.
Audi does not seem too surprised that China is pushing for domestic brands. “For a country with such a gigantic capacity also in terms of their own industry, they are always proud to promote their own brands,” said Pan Qing, head of China region sales at Audi China. “That is something that everybody can anticipate because if you look at those mature markets like Germany, Japan, Korea and the U.S, all the governments always use their own brands.”
It is too early to tell whether policies will translate to profitability for domestic automakers, but top officials aren’t anxious to change.
When asked if he would give up his Audi for a local car, Guo Gengmao, governor of central Henan province, said, “We should try to use Chinese cars when possible and actively advocate our officials to use them. But we should do so in a practical way and switch cars when we need to replace the old ones. Otherwise, it’s a big waste to replace cars when they’re still good to use.”
photo credit: audi