The German carmaker, Bayerische Motoren Werke AG (BMW), plans to launch a spacious version of its famous 3-series sedan in China to cater to the requirements of the customers who prefer larger cars. With this launch, the company also expects to provide tough competition to existing players like General Motors Corp.
Made specifically for the Chinese automotive market, the new 3-Series is 11 centimetres (4.3 inches) longer than the regular model. It is in line with the company’s plan to increase sales by appealing to first time buyer's in China after selling many high priced models in the country.
At the Beijing Auto Show, the Sales Chief of company, Ian Robertson, said, “The premium market in China is developing from top downwards.”
Presently, the small car market in China is ruled by high volume manufacturers like General Motors Co. (GM). BMW, Volkswagen AG (VOW)'s Audi, and Daimler AG (DAI)'s Mercedes-Benz. These companies are making expansion in this market to attain growth and shift the focus from the biggest models such as 7 series, majority of which are sold in China alone, as overall sales of the cars slipped to 1.3 % in the country during first quarter. As per Bernstein’s research, last year Sport Utility Vehicles (SUV) and bigger sedans accounted more or less 70% of the premium car sales in China against 40% in Germany.
World's three largest luxury car producers from Germany are all set to attain higher market share in 2012 as large variety pressurise the high volume manufacturers. Beijing Auto Show witnessed the exhibition of a pre production version of Mercedes CLA. This four- door coupe is the smaller version of $71,300 CLS. Audi too showcased their concept models based on the platform of Q3 compact SUV. The company plans to import this car to china starting this year as a follow-up to A3 hatchback and A1 sub compact both of which were sold last year. The new version of 3-series will be BMW's second model designed exclusively for China following the début of long-wheelbase 5-series in 2010.
Dieter Zetsche, DAI CEO, feels that the supreme motive is to arrive at the top segment as there is lots of opportunity. He also said that growth in this sector will range from 15-20 percent, that's more then triple of 5% of total market gain. The mass market brand like Toyota Motor Corp and Honda Motor Corp. are beginning to feel the heat of expansion by the German car makers, which rules the market with combined share of more than 75%.
Vice president of BAIC Motor Corp, Dong Haiyang says that the discounts provided by the luxury car makers is exerting a pressure on cars in the range of 2,50,000 yuan-3,00,000 as the consumers can now have a premium brand car in the same amount. They can get a Mercedes A-class compact for as low as 1,78,000 yuan as compared to a 2.4 litre engine Honda accord at 1,72,400 yuan. Honda is trying to revert back by being more price competitive and catering to Chinese tastes. German car makers on the other hand are trying to counter the competition by assembling the vehicles in China. BMW opened a new plant at Tiexi to produce X1 compact SUV from next month. This immense competition is forcing the companies to stand out. Italy's Fiat SpA (F) exhibited Viaggio sedan in Beijing. A GUCCI edition of the retro-style 500 mini car will be used by the company to separate it from Volkswagen.
Due to its fast growth and the higher prices, China is the most sought after market. Even though, Mercedes S-Class costs approx. $1,47,500 in China compared to $91,850 in US, its main market is China. German brands are able to attain average profit margins of about 16-18% in china compared to 10-12% globally, due to the higher prices.
