Reviving Brands

premium

China's Car Makers Take On Luxury Brands

great wall
China is unveiling new luxury cars. Source: Reuters

Chinese automakers have confined themselves to the mass market until now but are increasingly pushing into the premium segment to do battle with German premium brands Daimler, BMW and Audi.

They’ve enlisted German help along the way. Great Wall, whose Haval brand has established itself as China’s most successful SUV, is forging into the luxury market with its Wey brand, named after company founder Jack Wey. It has hired a German, Jens Steingräber, the developer of Audi’s Q3SUV to be its brand CEO.

Chinese investors have also revived Germany’s Borgward brand, which had ceased operations in 1961, and plan to resume production near Bremen in northern Germany. At the Shanghai motor show which started this week, they are focusing on the brand’s “German engineering.”

German developers are still regarded as setting the standards for auto design, and the top German brands still dominate the Chinese premium market. So the big three, Audi, BMW and Mercedes, are responding to the prospect of Chinese competition with demonstrative calm.

BMW board member for sales and marketing Ian Robertson told Handelsblatt he still sees room for enough growth in China even if the era of double-digit growth rates is probably over. “China is still growing significantly faster than other regions of the world,” he said.

Foreign-made premium cars are still cherished as status symbols in China.

But there are signs that China’s premium auto market is becoming a battleground between homegrown makers and foreign brands.

Daimler’s planned launch of its EQ electric brand in China is on hold because of a trademark dispute with state-owned automaker Chery, which says it has used the name “eQ” for its two-door battery electric car for two years, and wants China’s trademark regulator to block Mercedes from using the name EQ in China.

A ruling in favor of Chery would be a huge setback for Mercedes in China, the world’s largest electric car market where anti-pollution regulations have ensured more new-energy vehicles are sold there than in the rest of the world combined.

Audi too has had sales hit by a conflict with its own dealers and with its Chinese joint venture partner First Automotive Works, or FAW.

Most of the 500,000 Audis sold in China each year are manufactured in plants that Audi operates in cooperation with FAW. But Audi also plans to cooperate with another Chinese firm, SAIC, to keep up with growth in China. That has annoyed FAW, which has throttled deliveries of Audi models to its dealers in China this year. That has driven premium buyers to BMW and Mercedes. But Audi is sticking to its plan to work with SAIC to boost its output in China.

That’s because the market is expected to keep on expanding. Premium cars account for around 15 percent of new registrations in western Europe, compared with less than 10 percent in China. Around 2.1 million premium cars are sold in China per year. That could rise to 3 million in 10 years, according to a market forecast by Audi.

With these prospects of growth, it is worth sticking in the market.

 

Lukas Bay is an editor with Handelsblatt’s companies and markets desk. Stefan Menzel writes about the auto industry focusing on Volkswagen. To contact the author: bay@handelsblatt.com and menzel@handelsblatt.com

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