Luxury Car Market: The Key Factor In China Is A Nonstarter In The U.S.

on April 14 2014 | in Daily Headlines Trending | by | with No Comments

Luxury is in the eye of the beholder. A case in point would be the luxury auto segment in the world’s two largest car markets. Well-to-do inhabitants in China and the U.S. now have the access and spending power to choose from virtually the same lineup of models, but the results show they clearly don’t see eye to eye.

In America, people will often admit to feeling a sense of pride in owning a luxury car, such as Mercedes, BMW or Lexus , because those sedans portray an image of wealth, money and splendor in addition to their superior engineering. Thomas Libby, the consultant at data provider iHS, calls this an upscale brand image. For the past 3 years, Mercedes and BMW have been locked in a head-to-head competition to win the hearts of American consumers. Although Mercedes currently holds the crown as top seller, previously it had been Lexus until its supply chain was disrupted by Japan’s tsunami in 2011.

Shifting our lens from America to China, we can see something distinctly different that is unlikely to repeat elsewhere. Automotive market research firm WAYS Consulting in China has shown that Audi led BMW and Mercedes for 5 years in a row. Audi, which is absent from the top 5 list for America, recorded an annual sales growth between 22% and 52% in China over the past 5 years. Just last year, new vehicle registration numbers indicated that Chinese gobbled up 474,853 Audis. On the other side of the globe, Americans bought 318,422 units of Mercedes.

Car owners from any part of the world do, of course, share some common traits. To be seen as the owner of a pricey car is a public means of exhibiting success. And this direct association between luxury cars and status for Americans would also apply to Chinese society. But behind the images of grandeur is something peculiar in a country that’s 7,000 some miles away from America.

Thanks to the Chinese government, Audi has become an icon of power. Used as the official car of the country’s top politicians, Audi has benefitted from an invaluable source of advertising. And this is not something that most Americans could easily decipher, given that it’s not the norm for them to emulate their politicians in the same manner.

Audi started assembling cars in China back in 1995 with its joint venture partner First Automobile Works, the oldest Chinese carmaker. The German brand has long made the procurement lists of Chinese government officials at all tiers. Later, Mercedes and BMW were also included but Audi’s cachet had already been well established.

Only recently, various reports have started to focus on rumors of Chinese government orders to buy more Chinese-branded cars that were not well received by officialdom. But Audi appears to be the conventional favorite of many officials.

Read more at Forbes.

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