Luxury car sales seen falling due to China’s economy image

The recent China downturn seems to put its stamp also on the luxury car division worldwide, with sales estimated to drop, despite them being partly compensated by the growth in demands in the U.S. and Middle East auto markets.

Bentley sales, the U.K.’s luxury car marquee, witnessed a drop in profits of 12% from 5,254 units to 4,639 vehicles sold year-on-year for the first six months of 2015. This has reduced the German-owned automaker’s profitability in almost a half to €54 million. Moreover, operating margins went down from almost 11% in 2014 to 5.75% this year so far.

Back in March, BMW AG’s CEO at that time warned investors of an upcoming downturn in China, and his predictions have proved to come true as China’s largest auto market economic situation is affecting carmakers worldwide. Car sales in the Asian market have declined for two months in a row leading to stock shares falling for many carmakers relying on China’s performance in the auto sector.

Despite BMW and other German cars winning for the past decade due to a massive growth in car sales in the Chinese market, China’s slowing economy, the government’s approach to corruption, restrictions on car ownership to reduce pollution and currency devaluation led to imported premium cars, which are more expensive than mainstream auto lines, to see their sales falling and were forced to cut prices.

Lutz Meschke, Porsche’s finance chief, said “The result is that profits in China are falling significantly. They are falling now and they will continue to fall significantly in the future.” The German brand reduced the price of its Panamera this year by as much as 20%. BMW’s finance head, Friedrich Eichiner, also stated that “China’s short-term development over the coming months is harder to predict. We are currently adjusting production to match slower growth, and reducing retail inventory.”

Audi, which is the top-selling premium brand in China, had to cut its Changhun plant production by 4% in the first half of this year as the demand in China slowed.

By Gabriela Florea