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High grade auto market sees rapid growth

Source ce.cn 2007-08-15

The high-grade auto brand of Nissan finally came into market in July. This indicates that all the current high grade production car brands have entered domestic market.

In China, the price of segmented high grade vehicle market is basically above RMB300, 000 yuan. Audi, Benz, BMW and Lexus are the main force with annual sales volume exceeding 10,000 respectively. Brands such as Volvo, Land Rover, Jaguar, and Acura are in the same market too. In 2006, the above-mentioned brands had an aggregate sales volume of 180,000, accounting for 3 percent share in China's car market. As far as the quantity is concerned, the market is not a big one; but as it is in the high-end market of technology and brand competition, it attracts more concern from consumers. Compared with other segmented car markets, competition of high grade vehicle is more internationalized, therefore the market is one of the most attractive fields of China's car market.

As for high grade vehicle manufacturers, the greater impetus is from the fast growth of the market. In 2006, the cumulative sales of top 5 high grade vehicle brands increased by 45 percent around year-on-year, far beyond the increase rate of domestic passenger cars, which was 30 percent. In the first 6 months of this year, Benz achieved sales of 13,500 in domestic market with the 38 percent increase compared with the same period last year. BMW and MINI brands of BMW Group obtained sales of 23,667, increasing by 38 percent year on year. Lexus has never announced its sales volume, but the increase rate was above 100 percent as someone disclosed. Volvo, on the basis of 50 percent increase last year, the growth rate of the first 6 months was as high as 81 percent. Comparatively, Audi, with the biggest sales volume, was the mass brand that increased most slowly; its sales of the first half of this year was 48,716, up by 27 percent year on year.

The high grade vehicle market of China has been growing quickly for a few successive years. However, auto manufacturers have reasons to be still confident. At present, high grade vehicles take up less than 4 percent in the car market in China, while the international level is around 8 percent. In Germany, the figure is even much bigger. Even the 8 percent average level is realized, there is still huge market space. Calculating with data of 2006, 4 percent means sales of 150,000, which is more than 80 percent of the sales volume of high grade vehicle all the year around. Moreover, along with the continuous growth of China's car market, the base number is getting bigger. By then, this 8 percent may spell hundreds of thousands of vehicles.

Looking at the brands competition, Audi is taking the lead solidly. But rivals like BMW, Benz, Lexus are chasing at a higher speed. In the first half of this year, all brands launched new products. Meanwhile, brand building-up activities are too many to be dazzling. Brand building-up and promulgation are the focus of high grade vehicle brands in the first 6 months. The key points for high grade vehicles to survive and develop are to make consumers understand original brand concepts, improve brand recognition and reputation, attract and keep customers in the sales service and after sales service.

As for brand construction, Audi and BMW made the heaviest investment. Audi held China Philharmonic Orchestra Plant Concert, Audi Vorsprung Circle accepted two new entrants, and Audi also conducted product experience activities of all Audi series, etc. In addition, as a formal provider of high grade vehicle in Beijing 2008 Olympic Games, Audi made full use of Olympic and started Audi Olympic Plan. BMW is well aware of the importance of altering negative image. In order to show its social responsibility and good brand image, BMW participated in a series of social public welfare activities, and put forward a "Cultural Journey" for the purpose of discovering and initiating culture protection.

In the second half of this year, China's car market will keep growing at a relatively high speed, and the fast growth of high grade vehicle market could be maintained. New products will be an important driving force. Audi will accelerate new products launch in the second half of this year, including not only A4 S-Line individual, also including A5 that represents the latest level and brand image of Audi; and R8 will be introduced to China market next year. Benz launched E230 in July, making up the shortcomings of inhomogeneous distribution of emission for the E-class group, and has made twice price adjustments to E Class cars. The most knockout one of BMW is BMW 5 series Li, an extra long type for China market by breaking rules; its sales in the first half year was 8363, increasing by 51 percent compared with the same period of last year and was accounting for one thirds of BMW's total sales. In March of this year, Volvo set the position of China CEO, who will report directly to Global Headquarter; the act further improved the importance of China market. At the same time, Volvo will introduce a series of new types to domestic market. For example, in the second half of this year, the first fashionable two door-sedan of Volvo C30 will come into China market. Volvo also made a huge price drop on the whole series in June, in which the best price cut was RMB70, 000 yuan. The effectiveness of price drop will appear in the second half of the year.

In comparison with other segmented markets of car market, it is more difficult to make home-made high grade vehicles, which will take longer time. Even high grade vehicles need to improve home-made rate so as to lower cost and enlarge the scale, but the quality requirement cannot be loosened slightly. The market leader is the one that solves the home-made problem successfully. Therefore, how to improve home-made rate will be the key to test domestic high grade vehicles in the second half of this year or even in the fairly long time in future.