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Automakers on uphill road to build brand in China

(Agencies)
Updated: 2009-09-07 09:38

Dalgleish Cadillac auto dealership general manager Keith Dalglesih stands in the dealership showroom in Detroit, Michigan June 19, 2009. [Agencies]

Tailoring its models to the tastes of Chinese consumers, GM sells Cadillacs and other sedans with roomy backseats as many well-heeled Chinese prefer to be chauffeured through traffic-choked roads in China's mega-cities.

Even Porsche launched a relatively staid four door sedan in China this year which offers ample leg room for company executives travelling in the backseat.

Related readings:  19 domestic automakers poised for growth Jan-July  US automakers brace for slowdown in sales  Japanese automakers look to Chinese expansion  Automakers steer new energy cars for growth  Shanghai auto expo: showdown for global automakers

Drivers are often used for corporate cars and among the well-heeled because the commutes to work in China's traffic-clogged roads can be long, tiresome affairs.

Bland Brands

Gloomy predictions for car sales in China this year due to the financial downturn were swept away by a multi-billion dollar government stimulus plan that included tax breaks and sales tax cuts on some car models, fuelling a demand spurt at a time when many factories had slowed down production.

Demand for new cars jumped so high, so quickly that some customers have had to wait weeks for deliveries of new vehicles due to manufacturing logjams.

Industry analysts predict double digit sales growth in the coming years as more first-time car buyers enter the market and China's wealthy and upper middle class become two car families.

Many of the cars that will end up on Chinese roads will come from the factories of domestic brands such as Geely, Chery and Brilliance China Automotive Holdings.

The local brands are significantly cheaper but so is their quality. Car prices can range from 300,000-700,000 yuan ($44,000 to $102,000) for top range cars from the BMW 3 and 5 series and Audi A4 and A6. Meanwhile, the cheapest local brands such as Chery's QQ can go for as little as 30,000 yuan ($4,400) or less.

Cars in the luxury category include BMW, Audi, Toyota's Lexus, Honda's Acura, Nissan Motor's Infiniti and General Motor's Cadillac which offers a model that stretches about 10 cm longer in the back for the local market.

In sharp contrast to its sporty and sophisticated reputation in most of the world, BMW's flashy image in China owes much to the company's entry to the market in the mid-1990s when the first generation of newly wealthy began to emerge.

Desirable or not, the nouveau riche image has helped make China one of BMW's fastest growing markets, with sales up 28 percent to 65,822 units last year.

"Some super rich people have actually been collecting BMWs, getting one not just for themselves but for their wives, kids and even their mistresses," says Lin, the futures trader.

Audi, meanwhile, benefited in a different way as the only foreign car brand on government procurement lists until recently, helping its A6 to become a favourite among senior Chinese officials.

Such unofficial endorsement has not only helped Audi, VW's luxury brand, get a fifth of its annual China sales from government bodies, but has also made it a favourite among China's new generation of business elite.

"Audi buyers are people who want to keep both feet on the ground. They want to convey a very down-to-earth but still powerful image," said Klaus Paur, director of automotive industry market research firm TNS's North Asia branch.

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