Premium Automakers Worried About Chinese Market image

The increasing demand in China seen by the luxury automaker over the past years, is about to change.

Although the automaker will display impressive models at the Paris auto show, such as Audi’s updated $146,600 top-of-the-line R8 coupe and Porsche’s $126,000 four-wheel drive 911, their future is to be decided in the Chinese market, where luxury-car buyers are already beginning to show signs of saturation.

Luxury auto giants BMW, Audi and Mercedes, which account for bout three quarters of luxury car sales in China, have already felt the effects of the slowing economy. Daimler has already announced on September 20th that Mercedes will see a decreased profit this year due to tough competition in China and the European crisis. Porsche has also made a restructuring plan, which includes cutting spending and output in 2013 to offset lower sales.

“The Chinese have overconsumed premium cars in recent years,” said Singapore-based Bernstein analyst Max Warburton. “Right now, we see a number of risks to sustained high profits from China.”

The growing ranks of millionaires have helped luxury brands reach increased sales since 2010, making the Chinese market a profit driver for high-end car sales. Now automakers are forced to switch to smaller vehicles in order to cut prices and swelling inventories.