China: Europe’s carmakers searching for the winning strategy image

The world’s largest auto market has been the home of an intense battle between the European powerhouses – especially the German automakers – when it comes to both mass-market and luxury sales.

China has been growing astonishingly rapid in the past few years, with profits jumping and earnings margins lifting the accounting books at a tremendous pace. But all that is coming to an end, as the competitiveness has gone through the roof and the market is nearing maturity. “We were really spoiled the last few years by the growth rates … but we saw in 2014 that they were increasingly on the decline and above all, it was no longer possible to achieve the kind of contribution margins we had three or four years ago,” warned recently BMW chief executive officer Norbert Reithofer in a rare sign of automotive truthfuleness. The auto executives, industry experts and analysts are all saying the same thing – brace for an automotive market that is running out of gas – smothered by pollution, which has brought sales restrictions and by production overconfidence.

Last year the auto market in China grew 9.9 percent to 19.7 million units and the China Association of Automobile Manufacturers forecasts the total increase for 2015 will go down to 8 percent and reach 21.3 million passenger car units. Some inudstry officials are even more pessimistic than the CAAM, projecting an even slower growth. For European automakers, the market is key – it represented around 25 percent of the global quota last year.

Via Automotive News Europe