Automakers see affluent Chinese buyers reoriented towards cheaper models image

Chinese millionaires are as common as the country’s famous rice and the affluent buyers have always been keen on showing to everyone their new found status, for example purchasing expensive models such as Porsche’s Cayenne sport utility vehicle.

Having so many rich people ready to showcase their wealth is a main reason why China could also surpass the US as the largest luxury auto market in the world, after securing the overall leadership years ago. But the government has also started its own strategy – crack down on graft and flaunting consumption, with the result that luxury car sales have also started to see a cool down, with Chinese buyers now seeking less opulent rides that would not attract as much attention. That has triggered numerous worries among brands such as Porsche, BMW, Audi or Mercedes-Benz, who have been used to reaping massive profits from the Chinese market. For example, Sanford C. Bernstein estimates put for those brands around 50 percent of worldwide profits in China. “The enormous growth rates luxury-car makers like us have seen in China in recent years won’t continue,” commented Porsche Chief Financial Officer Lutz Meschke this month.

Taking Porsche as an example, we can see how the brand’s deliveries in the country tripled to almost 47,000 units in just half a decade – but the automaker’s sales could gain just five percent next year. Also, according to IHS Automotive, China could this year become the brand’s largest market, with sales of around 60,000 units to 53,000 in the United States. The main driver of growth – the Macan, which is 42 percent less costlier than the larger Cayenne.

Via Bloomberg