Chinese companies taking on niche premium vehicle brands

BYD and Geely launch luxury cars as Lexus and Infiniti suffer drops in sales

Niche premium brands, like Lexus or Infiniti, once had a stout following in China; people want to be unique and different in urban streets' thick traffic.

But they are hitting speed bumps, sandwiched between larger companies like BMW and Mercedes-Benz, which offer a larger lineup to woo away customers, and local marques that have long dreamed of taking on international rivals.

China has one of the world's largest premium vehicle markets thanks to the sheer size of its population and economic growth over the past few decades.

Despite the lingering COVID-19 pandemic, Chinese customers purchased 3.09 million premium vehicles in 2022 from brands including Mercedes-Benz, BMW, Bentley and Rolls-Royce, up 6 percent year-on-year.

The growth rate was triple the overall passenger vehicle market's, which stood at 1.9 percent year-on-year, according to the China Passenger Car Association.

But it was not a rosy picture for smaller brands. Honda's upscale brand Acura pulled out of China in 2022. Nissan's Infiniti, once favored by new families, saw its sales tumble 57.8 percent to 5,687 units, due to its limited product lineup.

Even Toyota's Lexus and GM's Cadillac, which once sat behind only the German giants of BMW, Mercedes-Benz and Audi, have started to lose steam.

Cadillac sold 198,000 units, down 17.7 percent year-on-year. Lexus, which insists on importing vehicles from Japan instead of producing them locally like most others, is less seen on car buyer's list of choices. In 2022, it delivered 184,000 vehicles, down 18.58 percent year-on-year.

Ford's Lincoln, which once failed in the 2010s in China, sold 79,300 vehicles in 2022, down 13.4 percent year-on-year.

A stark contrast was FAW Group's Hongqi which overtook Cadillac, selling 310,000 vehicles in 2022, up 3 percent.

Tesla was the best-selling electric carmaker, delivering 410,000 vehicles to seize the fourth position on the top 10 list, after the three German giants.

Two Chinese startups, Li Auto and Nio, made it into the top 10 list, with their sales soaring 47 percent and 34 percent respectively.

Nio co-founder and CEO William Li said his company will outsell Lexus this year, which means its sales are to double the 2022 figure.

"I am confident that we can beat Lexus in 2023, although we will be still behind BMW, Mercedes-Benz and Audi," said Li in late December as it unveiled new models.

Sales figures in January show that Nio and Li Auto were ahead of not only Lexus but those smaller international marques as a whole.

Wang Lei, an IT engineer in Beijing, said he is considering trading his Volvo S60 sedan for a Nio ET7.

"I tried some models from international brands as well, but they don't have electric vehicles as good as their gasoline ones," said Wang.

He said compared with Chinese startups, those traditional premium brands are slow to introduce electric models and their operating systems are not good enough.

Electrification may hold the key to future success in the premium vehicle segment.

A breakdown of sales figures from the CPCA show that sales in China's premium gasoline market went down 4 percent in 2022, while the premium EV segment soared 49 percent.

This is the reason why the German brands are speeding up to build EV plants and launch their China-made models.

BMW said it will have 11 electric models in the Chinese market this year, including the China-made iX1 and the electric Spectre from its luxury marque Rolls-Royce.

The arrival of the new electric models will see BMW offer the most diverse EV lineup of any premium brand, covering almost every segment.

Mercedes-Benz said it will launch six electric and plug-in hybrid models this year in China, including the EQE and the EQS SUVs.

Meanwhile, Chinese volume carmakers are launching premium vehicle brands. BYD has unveiled its Yangwang brand, which Chairman Wang Chuanfu said "will reshape the contours of the global luxury car market "thanks to new technology developed in-house over the past two decades.

Of its models, the electric Yangwang U8 off-roader is to compete with the Mercedes-Benz G-class and Land Rover Defender.

Geely launched its luxury brand Galaxy on Thursday with "premium long-range hybrid and pure EVs". Three models are to hit the market this year.

China's largest SUV maker, Great Wall Motors, said it will unveil a smart new energy vehicle brand in March.