China Luxury Cars Market trends

China luxury car market is flourishing

The automobile market in China is attracting huge investments from domestic and foreign companies. The boom in the market has been fueled by sales of cheap local vehicles, but recently the luxury car market has also taken off. By now, most major luxury brands see China as the fastest-growing market, and often the largest in which to expand. Due to strong demand, all major luxury vehicle manufacturers, including Mercedes-Benz, BMW, and Audi, reported positive data.

What Luxury brands are doing the best?

According to a report by the Chinese Automobile Manufacturers Association, overall sales fell by 1.7%, while luxury sedans grew by 18.8% and premium SUVs by 3.5%. About 1.16 million vehicles were sold in 2018.

• For example, Mercedes-Benz announced that, along with its Smart brand, it is the first premium manufacturer in China to deliver more than 600,000 units in one year.
• BMW also grew at a double-digit rate, selling 577,000 vehicles in the first 11 months and achieving 6.4% growth over the previous year.
• The Audi carmaker was able to increase its sales by 13%. Particularly successful was the A4L model, a long version of the Limousine, developed specially for China. In addition, Audi has planned over 10 new models by 2022, including the Audi Q2L e-tron electric vehicle, produced exclusively on the Chinese market.
• British brand Jaguar Land Rover (JLR) sold more than 100,000 vehicles in China last year, making it the company’s largest market.
• Bugatti has even sold a number of its Veyron hypercars in China, which cost between 25 million yuan (31.5 million HK $) to 38 million yuan each.

Despite high import taxes, China’s largest cities are inundated with Ferraris, Lamborghinis, Bentleys, and other top models.

Government additional restriction on automobile production to increase local production

The Chinese auto market continues to have great potential. However, there is growing concern that the influx of foreign luxury vehicles is detrimental to domestic brands. The China Association of Automobile Manufacturers says Chinese brands will be squeezed if the government allows foreign automakers to become more independent from their domestic partners.

The government responded by placing additional restrictions on automobile production in its updated Investment Catalog, stating that joint ventures are the only way for foreign companies to produce complete vehicles in China.

Anti-monopoly investigations by Chinese regulators into the cost of vehicles and spare parts led Audi, BMW Mercedes-Benz, Jaguar Land Rover, Fiat’s Chrysler, Toyota, and Honda to announce price cuts.

Despite attempts to reduce the advantages enjoyed by foreign brands, investments continue as the market is huge and consumers are even more likely to buy vehicles given the price cuts.

The demand for luxury brands in China means that investments will continue, not only in production capacity but also in increasing brand marketing for the Chinese market.

Luxury car sales have shown the most resilience during Covid-19

Even during the COVID-19 pandemic, where there was generally weaker development of the Chinese auto market, the premium and luxury vehicle segment rebounded strongly in China.

Information from the China Automobile Dealers Association reveals that luxury car dealers in the country sold 277,000 vehicles in April, an 11.1% increase from the same month last year. Thanks to this increase, luxury cars accounted for 18.7% of the market in April, a 3.6% increase over April 2019, and a 0.4% increase over market share in March.

The burgeoning growth in premium vehicle sales could be linked to:

• various incentives that governments have launched to stimulate the consumption of cars badly hurt by the coronavirus pandemic.
• Consumer preference for high-end models in car replacement
• Sales promotion offered by luxury car dealerships.

In addition, according to the Chinese Ministry of Public Safety, China’s auto-population has reached around 360 million by the end of June 2020. Therefore, the demands of consumers who want to replace old cars or buy more cars are approaching.

At the same time, it is becoming easier for users to get a luxury vehicle as automakers have added some lower-priced models to their product lines. For example, BMW launched the base version of the 1 Series priced at 231,800 yuan ($ 33,232) and the starting price of the Audi A3 is only 193,200 yuan ($ 27,698).

China luxury car market trends in 2020

Germany is the best sell luxury car market in China

n 2019, German luxury car brands Mercedes-Benz, BMW, and Porsche posted record sales in China. Audi and Volkswagen also recorded strong sales.

China’s new car market contracted by one-tenth in 2019, but German car brands performed well and gained market share as well as increasing volumes.

Audi has long been the leading luxury car brand in China but has now been overtaken by Mercedes Benz and possibly even BMW which has not yet released separate data for the BMW and Mini brands in China.

China is not only the largest auto market in the world, but it is disproportionately important to German premium car brands.

Indeed, China accounts for 50% of Volkswagen’s world sales, 37% of Audi, and 30% of BMW, Mercedes-Benz, and Porsche.

During the Covid-19, in particular, in April, all major German luxury brands enjoyed sales increases:

• At Mercedes-Benz, sales jumped by 4.7% to 62,200 units,
• At BMW, sales hit 67,000, an increase of 9.4%
• Audi enjoyed a sales increase of 29.9% to 61,500 units,
• Porsche sales surged by 23.9% to 8,767.

Luxury electric cars are in great demand among Chinese consumers

In recent years, consumers are gradually embracing new energy vehicles. Data from the Boston Consulting Group showed that over the past five years, China’s electric car market has reached 1.2 million units per year and has experienced rapid annual growth of more than 50%.

During COVID-19, specifically in June, the wholesale volume of NEVs rose to 85,600 units in June, an increase of 20.1% on a monthly basis.

For example, during the Covid-19, Tesla sales also jumped by 121% to 4,255 units.

 

How can brands enter the China luxury car market?

Getting into the luxury car category in China is no easy feat. Many companies face problems in this market because aspects such as branding and brand reliability are often overlooked by these car manufacturers. Many brands don’t try to fully understand the real needs of consumers.

Each brand has a value determined by the buyer’s expected benefits, many of them psychological, from being associated with a brand. If a brand lacks value, it will undoubtedly fail.

Branding is the key to success in the China luxury car market

The construction of your image first of all passes from the creation of a loyal community of followers. This can be created on WeChat as well as on other social networks such as WeChat, blogs, industry forums, newspapers, on Baidu and Q&A platforms.

Use Social Media to promote luxury cars in China

Given the use that the Chinese make of it, social media is a great way to promote your products in China. The two most used social media to look for luxury cars in China are WeChat (monthly active users 1.2 billion), Weibo (520 million monthly active users), Douyin (475 million monthly active users), Xiaohongshu (100 million monthly active users).

Open accounts on Chinese social media is essential for luxury car brands that want to increase brand awareness and visibility in the Chinese market.

• Wechat is an effective tool for sharing information and news with your followers.
• Weibo features make it useful for communicating quickly with many followers at the same time.
• Douyin offers brand the possibility to do short-video which are very attractive for Chinese consumers.
• Xiaohongshu is a UGC platform which can give brands visibility as people talk about you and recommend your luxury cars.

Baidu account and Baidu SEO

It is essential for a foreign brand to create a visible website on Baidu for two main reasons:

• Chinese are among the world’s largest internet users,
• Baidu holds over 80% of the search engine market (Nine out of ten Chinese users say they use Baidu to search online).

A proper Baidu SEO strategy is important to be on the first page of Baidu’s research for keywords.

A Baidu SEO strategy should be based on three main aspects: your website needs to be hosted in China, get an ICP license, and be in Mandarin.

If you want to know more about how to create a Baidu account and how to set up a Baidu SEO strategy, or simply to translate your website, contact us!

PR and Q&A platforms to increase brand visibility in China

Having contact with the specialized press is essential for an effective branding campaign. Our PR campaigns with the press are organized around several elements:

• A vast network of contacts,
• A detailed and regular report of our campaigns,
• High-quality content,
• A team of native speaker experts.

To complement your strategy, we offer online reputation management services. Word of mouth and user comments are the pillars on which a good online reputation is founded. The Zhihu Q&A platform is a great way to generate brand awareness.

Zhihu is a Chinese question and answer platform launched in 2011, similar to the western platforms Quora and Yahoo. Not only will be featured on Baidu Zhihu allow you to answer questions about your field, but also educate your target audience about your brands/products in a covert way. It’s a great tool for increasing your conversion rate and for increasing your brand awareness.

Gentlemen Marketing Agency is a digital marketing agency that is an expert in helping foreign companies to establish or strengthen their position in China. We can help your brand increase sales in China, thanks to our services like:

• Advertising
• Baidu SEO&SEM
• Social Media
• PR
• KOL & Influencers
• E-commerce and cross-border e-commerce
• Distribution

Contact us to discuss it further!

To read further about the Car Market in China:

• ELECTRIC CAR IN CHINA: LEADER AND STRATEGY
• HOW AUTOMOTIVE FACTORIES CAN FIND B2B CLIENTS IN CHINA
• CHINA’S AUTOMOTIVE MARKET – HOW CARMAKERS COMPETE USING DIGITAL MARKETING