Luxury car makers seek success in China

SHANGHAI: Construction tycoon Niu Yeqing owns four cars in which he cruises the streets of the Chinese city of Hefei, including a black Mercedes-Benz S600. His wife favours a burgundy red Porsche.

Niu does not plan to stop there and this weekend he will be shopping for a British-made Bentley car with a budget of $790,000 when he visits the Shanghai auto show, which opens on Sunday.

At a previous show he bought a German Audi A8, which he gave away as a gift.

"Isn't a car for people to enjoy?" he told AFP, adding that he was fond of automobiles that exhibited "strong power and speed" and enjoyed luxury labels such as Versace and Hermes.

Drivers like Niu are the reason why China has become crucial to luxury car makers, as a growing number of rich people with an instinct for flaunting their wealth pay hundreds of thousands of dollars for a single vehicle.

China's market for "premium" cars costing up to $190,000 was 1.25 million vehicles last year, second only to the United States, according to consultancy McKinsey.

But makers of ultra-luxury cars commanding even higher prices said China has become an important market due to rising incomes in the rapidly developing country, already the world's biggest auto market.

China was the world's second biggest market behind the United States for Rolls-Royce Motor Cars last year. Two of its top five global dealers are in mainland China, in the capital Beijing and commercial hub Shanghai.

"We think we have a very long-term, healthy future in this market," said Jolyon Nash, Rolls-Royce Director of Sales and Marketing.

"Chinese customers have a great appreciation for luxury and super-luxury goods. There's a definite cultural tendency to celebrate success."

The British carmaker, whose brand is owned by Germany's BMW, will Saturday hold the Asia launch for its new Wraith model, priced at around $794,000, hoping to attract well-heeled customers in China.

"The luxury car market has just not stopped. Two years ago, it completely took everyone by surprise," said Rupert Hoogewerf, founder of a China-based publisher of luxury magazines which compiles an annual rich list.

His Hurun Report estimates that China's 2.8 millionaires in dollar terms own an average of three cars per family, typically a business and personal car for the chief earner and another for the spouse.

The 64,000 super-rich in China, individuals with wealth of $16 million, own four vehicles on average, with at least one chauffeur-driven for a display of stature and convenience given China's urban traffic jams, the report said.

"There are always going to be wealthy people, who want to differentiate themselves from someone else," said Namrita Chow, a Shanghai-based senior analyst for IHS Automotive.

Some luxury car makers are going downmarket in China, offering less expensive models to reach more buyers while at the same time trying to maintain the prestige of their brands, analysts said.

As China's middle-class upgrade their cars they have become an emerging group of buyers for lower-end luxury vehicles, a sector dominated by German brands which account for 80 percent of the premium market, McKinsey estimates.

But China's slowing economic growth and a crackdown on corruption launched by its new leaders have taken some steam out of the luxury car market.

From May, China will bar at least 10 luxury brands from being used by military personnel as official vehicles, among them Jaguar and Volkswagen's executive Phaeton model.

Luxury car brands have been targeted by China's state media over quality and by outspoken Internet users angry over a widening income gap, among the pitfalls in the developing market.

Last month, state television accused three luxury German automakers -- Mercedes-Benz, BMW and Audi -- of using toxic materials in components used to absorb vibrations.

Online reports last year about a crash involving a Ferrari driven by a top official's son, who died in the accident, set the Internet abuzz and raised questions about corruption, before being censored.

Ferrari was hit by an earlier scandal after a car left tyre tracks on a protected landmark, an ancient city wall, in a publicity stunt gone wrong. 

Luxury car makers seek success in China