On Air Now

Tune in to Listen

99.9 FM Hibbing, MN

Weather

Current Conditions(Hibbing,MN 55746)

More Weather »
59° Feels Like: 59°
Wind: NNW 14 mph Past 24 hrs - Precip: 0”
Current Radar for Zip

Today

Partly Cloudy 65°

Tonight

Scattered Thunderstorms 49°

Tomorrow

AM Clouds/PM Sun 62°

Alerts

  • 0 Severe Weather Alerts
  • 0 Cancellations

In the driving seat: China's yuppies are new market force for global automakers

A model poses beside a Ford Ecosport during a media presentation of the 34th Bangkok International Motor Show in Bangkok March 26, 2013. REU
A model poses beside a Ford Ecosport during a media presentation of the 34th Bangkok International Motor Show in Bangkok March 26, 2013. REU

By Samuel Shen and Norihiko Shirouzu

SHANGHAI/BEIJING (Reuters) - Global automakers are scrambling to meet the demands of China's young urban professionals, who want a car that makes them stand out, yet don't always have the money to splurge on a top-end model.

After nearly two decades of frenzied growth driven mainly by the very wealthy, China's auto market is maturing, yet remains ferociously competitive with manufacturers having to react quickly to shifting consumer trends.

Today's emerging buyer has more modest financial means, yet aspires to own a car that's "different".

People like Zhou Wenxi, a 32-year-old Shanghai cram-school owner, and Guo Yetao, 23, a software salesman from Hangzhou, are fuelling two trends: hot demand for smaller crossover sport utility vehicles like Ford Motor Co's EcoSport; and more interest in affordable, entry-level luxury cars like the Audi

A3.

There is a potential "seismic shift" in the influence these young urban professionals will have on China's auto market, says Yale Zhang, head of Automotive Foresight, a Shanghai-based consultant.

"There are different tiers of young urban professionals. Some are rich and a bit older, others are more normal," he said. "But they tend to be similar in two traits: they want to be different, and don't necessarily have an endless amount of money to throw around."

Guo, the Hangzhou salesman, recently took out a loan to buy an EcoSport crossover for 115,800 yuan ($18,700), while Liu Yao, a 22-year-old office worker in Huaibei in Anhui province, borrowed from his parents to buy a Haval M4 mini-crossover from Great Wall Motor Co Ltd <601633.SS> for 60,000 yuan.

Among the less well-off young urbanites, the EcoSport, at 94,800 yuan, has been a volume seller for Ford since its launch early last year. Sales last year were 59,680, and reached 17,392 in January-March of this year.

At this week's Beijing auto show, car makers including PSA Peugeot Citroen , Hyundai Motor Co <005380.KS> and local firm Haima Automobile Group <000572.SZ> will unveil new mini-SUV models. Chevrolet launched its Trax, a tiny crossover, in China earlier this month.

According to IHS, there were just five subcompact SUV models on sale in China in 2010. By 2020, there will be almost two dozen, driving up sales of this segment to more than 880,000 from 345,650 last year.

AFFORDABLE LUXURY

Other young professionals, maybe small business owners or higher-earners, are setting their sights higher.

Zhou, the cram-school owner, paid about 280,000 yuan ($45,000) for a red Audi A3 compact sedan. "Audis aren't flashy, and the A3 is entry-level, so the price isn't outrageous," she said.

Manufacturers will show off several more affordable, entry-level luxury cars at the Beijing show.

A crucial shift for them will be to produce more of these models in China, which would cut the price as they would not be subject to hefty import duty and other taxes.

Volume sales in this premium compact car sector have trebled to more than 52,000 in the past four years, according to IHS data, so remain, for now, a tiny niche in China's total passenger car market of close to 16.8 million.

Some global luxury brands, such as Nissan Motor Co Ltd's <7201.T> Infiniti, Honda Motor Co Ltd's <7267.T> Acura and General Motors Co's Cadillac, have been late to enter China, and now see its potential as a market for premium cars.

Infiniti is looking to improve price competitiveness with what global president Johan de Nysschen calls a "very aggressive ...and rapid localization" strategy - making locally as many as 80 percent of the 100,000 cars Infiniti aims to sell in China in the medium term. The brand also aims to capture fast-emerging, young buyers with affordable entry-level luxury cars.

"You've got a big (wave) of people coming in now. They have disposable income; they are very much attuned to the premium brands," de Nysschen told Reuters on Saturday. "For us, and for other car companies, this presents a big opportunity because it's a market force."

Nissan has no compact car in its product line-up today, but Infiniti plans to bring the Q30 compact crossover - on display in Beijing as a concept vehicle - to China eventually after the model goes on sale in Europe next year.

For now, Infiniti is set to start making a couple of mid-size cars - the just-launched Q50 sedan and the QX50 crossover - at an existing Nissan plant in Hubei province later this year.

The Q50 currently starts at a hefty 389,800 yuan ($62,900) in China because it's imported. De Nysschen said the China-made model should be significantly cheaper once its made locally, and is not subject to China's import duties and taxes. The Q50 starts at $37,150 in the United States.

Infiniti sold just 17,108 vehicles in China last year, though that was up 54 percent from 2012. It plans to increase the number of its China retail outlets to 80 this year from 67 currently.

Ford last week said it would open its first eight Lincoln stores in several cities from October, and would have 60 stores by 2016.

Five years ago, there were fewer than a dozen luxury car models sold in China under five premium brands. Today, that has mushroomed to more than 90 models offered by 25 brands, says market research firm TNS.

To protect their market edge - and counter slowing economic growth and a government crackdown on excess - established luxury brands such as Audi, Mercedes-Benz and BMW are expanding their line-ups into entry-level models and producing more models in China to make them more affordable.

Audi, for example, priced its A3 hatchback from 199,000 yuan last month after it started making the car in Foshan, near Guangzhou.

(Additional reporting by Yoko Kubota in TOKYO; Editing by Ian Geoghegan)

Comments