BMW-Audi: Battling for leadership in China

Tuesday 27 December 2011, 10:09 AM by

BMW and Audi, the top two luxury car brands are fighting for dominance in China's auto market. China is soon expected to overtake Germany as the world's second largest market for luxury cars after U.S. The sale of luxury cars in China has increased by 39 per cent to 939,000 in 2011, surpassing the 914,000 vehicles that are expected to be delivered in Germany. Apparently, the sales in China will see a 16 per cent hike next year, exceeding Germany’s 4.4 per cent growth by a huge margin.

Daimler's Mercedes-Benz, Volkswagen AG’s Audi and Bayerische Motoren Werke AG, all prominent luxury car manufacturers, are banking upon China and the U.S. to fuel expansion next year. According to the economists at Barclays Plc, Europe may get hit by recession in the initial six months of 2012. There are possibilities that Germany's car market, which is Europe's largest, will not see enough growth next year.

BMW-Audi: Battling for leadership in China |
BMW & Audi

Jenny Gu, a Shanghai-based analyst at research firm Leyland Motor Corporation (LMC) Automotive, said “Luxury car demand is still on the rise in China with low penetration rates.” She further said that “Sales of such cars in developed markets like Germany fluctuate together with the economic cycle.”

Audi has already beaten Daimler this year as the second largest luxury car maker and currently is leading the China's luxury car market. According to the November sales record in China, sales of Audi increased 69 per cent over last year, BMW climbed 9.8 per cent and Mercedes gained 24 per cent. The sales of these cars declined by 3 per cent in November 2011 in Europe.

BMW's sales for November went up 40 per cent to 200,699. Audi’s 11 month sales have increased 35 per cent to 283,600 and Mercedes witnessed a growth of 31 per cent to 170,112 at the same time. LMC has raised its 2012 estimates for China and has estimated 1.09 million sales for China and lowered its forecast for Germany to 954,000.

With the increasing demands of luxury cars in China, auto manufacturers like BMW, Daimler and Audi are planning to cut down their holiday breaks. Most of the BMW and Mercedes-Benz plants will be shut down for just one week for Christmas and New Year. Audi has also decided to close its European plants for two weeks this year.

There is a two-month waiting list for the BMW 5 series long-wheelbase sedan in China. Olaf Kastner, Chief Executive Officer of BMW’s Chinese venture, Brilliance China Automotive Holdings Ltd. (1114) said “The premium car industry has enjoyed over the past two to three years an amazing growth.” He further added “We still, in the premium segment, will see a higher growth rate than the mass segment for next year.”

According to Euromonitor International, the demand for luxury items in China will reach a record 88.8 billion yuan ($14 billion) in 2011, rising 82 percent since 2005.

In order to compete better in the market, the dealers of Mercedes-Benz and BMW have raised discount rates on some models in China last month. Now, only the future will tell which company will emerge as a world leader in coming times.

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