China is the land of opportunity for any carmaker – but especially for, luxury brands that have been breaking one record after another. However, last year’s 18 million sales will most likely not be repeated in 2011, as the government has stopped its tax incentives and wants fewer, and less polluting, car on the country’s streets.
Not that sales are plummeting – on the contrary. It’s just that, according to J.D. Power, the increase in the luxury car segment this year is slowing down to 29%, compared to a 48% growth in 2010. And this despite the fact that overall car sales in China are expected to drop by 5% compared to 2010.
In order to maintain their high volumes, BMW, Mercedes-Benz and Audi are offering not only China-only special editions, but also considerable discounts to Chinese buyers.
Data from chesi.com, a pricing guide that tracks more than 3,000 Chinese dealers, show than the BMW 3-Series is offered at a 19% discount. The markdown on the Mercedes C-Class Elegance reaches 20% over MSRP and on the Audi A6L (last year’s most popular luxury sedan) by 16% in certain districts.
Scott Laprise, an analyst at Beijing-based CLSA Asia Pacific Markets, says: “Dealers are worried about sales slowing and are cutting selectively in the luxury segment. They see where the overall market is going, so they want to be preventive and keep their sales going.”
With China being the largest car market in the world, competition is naturally fierce. Consumers can choose between 94 brands and 471 models, and most of them consider at least two or more models before buying.
Reduced demand results to rising inventories, which in turn not only pushes dealers to offer considerable incentives, but also eliminates the once long delivery times.
Story source: Bloomberg
