Despite cooling in the overall auto market in China, luxury car brands maintained a scorching pace in the first half of this year.
Volvo, the Swedish premium brand delivered more than 21,000 vehicles in the first half, increasing 36 percent from the same period last year, with China now becoming the brand’s third-largest market worldwide.
Audi, the luxury brand of Volkswagen Group and the premium car sales champion in China, sold about 140,000 vehicles on the mainland and in Hong Kong between January and June this year, 28 percent growth over a year ago.
Its June sales reached a record-high 27,658 units, enabling China to surpass Germany to become Audi’s largest single market worldwide.
The company aims to move 280,000 vehicles in China this year.
BMW, the second-largest luxury carmaker in China, reported a 61 percent surge in mainland sales in the first half to 121,614 vehicles.
The number includes 113,169 BMWs and 8,445 Mini cars.
Mercedes-Benz, another German luxury giant, registered brisk sales as well in the first half. Its China sales jumped 52 percent to 92,200 units.
Increasing individual wealth is the most important reason behind the boom, said Zhang Yu, managing director of industry consultancy Automotive Foresight (Shanghai) Co Ltd.
“As long as the economy keeps growing between 7 and 10 percent, the luxury car market will continue to expand in the future,” Zhang said.
“The trend (in luxury car market) is similar as other luxury goods like the Louis Vuitton bags.”
Meanwhile, China’s overall passenger vehicle market climbed only 5.3 percent in the six months ended June compared with a year earlier, according to statistics released by China Passenger Car Association on July 7.
Analysts said the slowing growth was due to a combination of factors including the expiration of government incentives, the Japanese earthquake that caused production to drop and a tightened car registration policy in the capital city.
The luxury segment, however, is not affected by the policy changes, as the former incentives targeted low-priced vehicles and restrained car plates generally pushed customers to buy more advanced models instead of cheaper models, analysts said.
The low-end indigenous vehicles were the worst hit segment in the first half, while demand remains strong in the mid- and high-end segment, said Zeng Zhiling, director of JD Power Asia Pacific Forecasting.
In addition to luxury brands, Volkswagen, GM and Nissan, with popular medium models, also saw robust sales, Zeng said.
According to JD Power projections, the luxury car segment will total 900,000 units this year and hit more than 1.6 million vehicles in 2015.
The biggest demand will come from the eastern coast of China, Zeng said, as some of the owners will replace their Passat or Camry for a luxury brand car.
He said that combined sales in Guangdong, Zhejiang, Jiangsu, Beijing and Shanghai account for 60 to 70 percent of China’s luxury car sales.
Betting on the segment’s promising prospect, major luxury carmakers are increasing capacity in the country to move even more cars, since locally produced cars have a much competitive price than the imported models and thus quickly boost volume.
In February and March Audi’s production lines in Changchun at the joint venture between FAW Group and Volkswagen were renovated for larger capacity.
The brand is now able to produce 300,000 vehicles in China annually.
Audi’s certain new models will also be built at a new Volkswagen plant in south China’s Guangdong province set to be completed in 2013.
BMW is now building a second factory at its joint venture in Shenyang.
The company said when the new factory is completed next year, its China capacity will be increased to 200,000 vehicles a year or even 300,000 according to market demand.
Mercedes-Benz will also greatly expand capacity of its Beijing-based joint venture to 200,000 vehicles a year by 2015.
Volvo, with new owner Zhejiang Geely Holding Group, will construct new auto plants in Daqing and Chengdu. Combined output could reach 180,000 vehicles in 2015, as Geely planned.