China Luxury Auto Sales to Surpass US by 2016 image

Analysts predict that China luxury auto sales will surpass the US by 2016 and equal Western Europe by 2020, due to increasing incomes.

Demand for China luxury vehicles is expected to more than double by 2020, reaching 3 million units from 1.25 million units sold in 2012. According to McKinsey & Co. deliveries of luxury vehicles might reach 2.25 million by 2016.

Foreign automakers, such as GM and Nissan, have already begun expanding their premium brands in China to be able to compete with the German automaker which account for about 80% of the total sales. Ford will begin selling its Lincoln nameplate in Chin in 2014 and PSA Peugeot Citroen is preparing its flagship DS dealership in Shanghai.

“Even now, China’s premium car market presents a sizable opportunity for latecomers,” Sha Sha, Theodore Huang and Erwin Gabardi at McKinsey wrote in the report. “Japanese and U.S. attackers still have a chance to create a market footprint.”

Over the past 10 years luxury auto sales have increased 36% annually, compared with 26% rate seen in the passenger-vehicle market. In 2012, Audi’s sales in China increased 30% to 405,838 units and German automakers continue to increase their share in the luxury auto market. a recent survey showed that 59% of the Chinese consumers would not choose a local brand when purchasing a luxury vehicle and 16% believe that a local automaker will never be able to design a luxury model to reach global recognition.