Three German auto brands – Audi, BMW, and Daimler’s Mercedes-Benz, have a choke-hold on the Chinese luxury market, reports WSJ. Combined, the trio accounts for more than 70 percent of China’s annual luxury vehicle market of $40 billion. But that’s not stopping GM’s Cadillac, Tata Motors’ Jaguar Land Rover, or Chinese-owned Volvo from making a bold play for market share. And insiders say they may be successful.
While “German” is synonymous with quality luxury autos in China right now, brand loyalty is not necessarily fixed. Buyers in China like to upgrade regularly, and many consumers are purchasing the second or third car for their household. They may be wiling to give new brands a spin. The majority of consumers, however, remain traditional in their tastes. “If they upgrade they chose as default the top three German brands and hardly ever chose any of the smaller brands,” said Klaus Paur, global head of automotive at research firm Ipsos.
Additionally, the established German brands are not going to give up sales without a fight. BMW, and Volkswagen AG’s Audi and Mercedes-Benz each get at least 15 percent of their annual sales in China. All three brands have rigorous expansion plans. Plus, the cutting-edge technologies, comfort, and design they offer Chinese consumers has proven to be a successful recipe. “To be credible sellers in this market, new entrants would need to bring products that have equally strong appeal to Chinese luxury-car buyers and must work to strengthen their brand image,” Patur said.
Patur added that a small minority of experienced drivers are willing to experiment with new brands, but as the Chinese market is so young, those buyers are few and far between. Tim Lee, the chairman of GM China, is putting a “laser-like” focus on this segment hoping to convert them with a suite of new Cadillac models. “When you have the product right, it makes the conquest sale less difficult,” he said. GM started producing the Cadillac XTS sedan in Shanghai this year. Nissan is also hoping to capture mature buyers with the Infiniti.
Volvo Car, owned by Zhejiang Geely Holding Group, has rolled out the Volvo XC60 T5 Elegance for about $77,000. Li Shufu, the company’s chairman, said that as consumers are shifting from more spiritual pursuits, away from materialistic ones, his brand is likely to catch on.
image credit: audi china