Car companies increase investment in local markets, forecast says China's luxury car market is expected to become the world's largest this year

In the past two years, the series of "rebellion" and "forced abdication" by luxury car brand dealers have seemed to send a signal that the luxury car market has long passed its golden age and entered the "silver age" with both growth and profits declining. However, even so, first- and second-tier luxury brands including ABB, Volvo, Jaguar Land Rover, Cadillac, etc. are still increasing their layout in the Chinese market. Maximizing the layout of market segments and accelerating domestic production have become two powerful tools for a number of car companies to dig gold in the silver age.

China's luxury car market accounts for less than 10% of the total market, and is expected to rank first in the world this year

"As far as I know, there are quite a few luxury car dealers that are losing money. The biggest losers are some newly opened stores, which are almost losing money before the sale and have no after-sales service as a source of profit." An Audi dealer in Shanghai told the First Financial reporter. Competition is unprecedented, but if we look at the comprehensive financial statements, the sales and profits of luxury car companies in China are still showing a relatively good trend.

Although BMW's sales in China in 2015 increased by only 1.7% year-on-year, China still remains BMW's largest market in the world. The sales of 464,000 vehicles account for 24% of the global market. In the past year, thanks to a year-on-year growth rate of 33%, Mercedes-Benz's car sales in China exceeded 370,000 vehicles, and China also became Mercedes-Benz's largest car market in the world, accounting for nearly 20% of the global sales of 1.87 million vehicles. Not to mention Audi, which sold 1.8 million vehicles worldwide, of which 570,000 were sold in China.

Therefore, even if the growth rate of the overall market and the luxury car market slows down, according to Ni Kai, president and CEO of Beijing Mercedes-Benz Sales Service Co., Ltd.: "The 9% share of luxury cars in the Chinese market is still low compared with the 15-20% share in other developed automobile markets in Europe." He believes that according to the government's "13th Five-Year Plan", China will maintain a GDP growth rate of 6.5% to 7% by 2020, so the luxury car market will continue to grow rapidly.

Jochen Goller, senior vice president of marketing at BMW Brilliance Automotive Co., Ltd., said in an interview with the First Financial reporter that everyone expected that the luxury car market would only achieve single-digit growth this year as China's economy normalized, but in fact the market performance exceeded our expectations. For example, in the first 10 months of this year, the sales of BMW Brilliance increased by more than 11% year-on-year. This strengthened his confidence in the future of the luxury car market. More importantly, compared with the traditional European luxury car market, where sales and model proportions usually do not change much for several years, the Chinese luxury car market is full of variables and possibilities. In his words, "As long as you design a good product and as long as your model design can meet the latest consumer needs, your new car will be successful in this market. This is one of the main reasons why automakers are very excited."

According to the Hurun Research Institute's forecast, as China's automobile market continues to grow, China will replace the United States as the world's largest luxury car market as early as 2016.

The overall market share of the top three brands has loosened, and second-tier luxury cars are competing

The future is bright, but it must be said that the competition in the luxury car market has heated up rapidly compared with the past 10 years or even longer. Data from PwC Strategy& shows that from the overall market perspective, the overall Chinese luxury car market grew by only 11% year-on-year in 2015. Compared with the annual growth rate of more than 30% before 2010, it has fallen back a lot. From the perspective of market share, Audi, BMW and Mercedes-Benz basically occupied more than 90% of the overall market share before, but now, the top three markets are gradually being eroded by second-tier luxury cars. Last year, Mercedes-Benz's market share increased from 16% to 19%; Audi and BMW (excluding Mini) saw their market shares slightly drop to 30% and 23% respectively.

Segmenting the market further to get closer to consumers and rapidly promoting localization are two key ways for luxury car brands to respond to market changes.

Volvo launched the new S90 and the new S90 long-wheelbase version at this year's Guangzhou Auto Show. Dai Sili, vice president of design for Volvo Cars China, said frankly that compared with previous models, the new S90 has taken more into account the needs of Chinese luxury car consumers in terms of design and functional configuration. Shen Feng, vice president of R&D for Asia Pacific of Volvo Car Group and president of Volvo Cars China R&D Company, said that compared with foreign car owners, Chinese Volvo owners are basically about 10 years younger, so they have higher requirements for intelligent and fashionable technology, so the two new models also try to meet these needs of Chinese consumers.

From 2016 to 2020, Volvo will enter a new phase, ensuring that at least two domestically produced and imported new cars are launched into the market every year. Starting with the S90, Volvo will extend more models with different functions from the same platform to the Chinese and global markets, and quickly deploy to gain a larger market share.

Although a latecomer in the domestic luxury car market, Chery Jaguar Land Rover is also growing rapidly thanks to the explosion of the domestic SUV market. At the Guangzhou Auto Show, Jaguar Land Rover's new generation Discovery was unveiled, and its SUV models Range Rover family and domestically produced cars all made their debut.

Talking about the future market, Chen Xuefeng, executive vice president of Chery Jaguar Land Rover, believes that Jaguar Land Rover's future advantages come from two aspects. One is the strong brand position of the Land Rover brand in the SUV field. The other is the acceptance of domestic Jaguar sedans by Chinese customers. Only 18 months after the domestic project was launched, Chery Jaguar Land Rover has launched three new cars on the market. By 2020, Chery Jaguar Land Rover will launch at least one new car every year. According to Chery Jaguar Land Rover's 2025 strategic plan, by 2025, the sales of the two major brands of Jaguar and Land Rover in China will exceed 600,000, and the models of the joint venture will exceed 400,000. Therefore, Chery Jaguar Land Rover announced the start of the second phase of capacity expansion at the auto show, building a new second assembly workshop and expanding and renovating welding workshops and other facilities. It is understood that the factory will be completed and put into production in mid-2018, adding an annual production capacity of 70,000 vehicles. By then, Chery Jaguar Land Rover will reach an annual production capacity of 200,000 vehicles.

The second-tier luxury brands are taking advantage of the victory, which makes luxury car brands including BMW feel the pressure and further deepen their development. BMW released the new BMW 1 Series sports sedan at the auto show. According to Gao Le, BMW believes that the fastest growing market in the next few years should still be the compact luxury car market. However, unlike other competitors, BMW does not directly copy its successful models in the global market to China, but will make localized improvements based on consumer needs. Therefore, the new BMW 1 Series sports sedan not only embodies many luxurious features, but is also equipped with many high-tech configurations. Gao Le believes that there are several prerequisites for any car brand to succeed in China: first, you must have a thorough understanding of the customers in the market; second, you must successfully implement the localization and localization strategy. These are also the two major weapons that all the above-mentioned luxury car brands bet on the Chinese market.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.