Behind the high growth of luxury cars

Different from the bleak business presented by the overall auto market, luxury cars still maintain a rapid growth since 2011. The data shows that the German brands occupying the traditionally strong position in the luxury car market have continued to increase their sales. The sales volume of Audi and BMW in the Chinese market has both increased by more than 30%, which is more than four times that of passenger cars.

Even Mercedes-Benz brand, which is dragged down by the channel, has achieved sales growth of 11% in the first half of this year. In addition, Jaguar Land Rover achieved an amazing 100% increase in the Chinese market in the first half of this year due to the low base. Compared with the many joint ventures whose sales targets are difficult to achieve, luxury cars are clearly "good-looking".

However, it is worth noting that from the "upsizing era" of luxury cars that are in short supply to the "price shopping" where bayonet sees red, the market has almost no transition. The market has rushed to a round of price reduction promotions and is passing information from the domestic auto market to multinational executives who are remotely commanding overseas.

Yan Jinghui, deputy general manager of the Beijing Yancheng Yayuncun Automotive Trading Market, told reporters that substantial price reductions have contributed to the increase in overall sales of luxury cars, but dealer profitability has dropped significantly. Judging from the current market inertia, by the end of this year, the return of the luxury car market will be foreseen again.

The luxury car market is cooling down. "Imported cars, especially the luxury car market, talked about the 'spring story' last year, and they both collected and sold profits. In the first half of the year, the "demonstration of the years" was fierce," a market analyst said jokingly.

The continuous cooling of the luxury car market should be traced back to the price war that was triggered by the Mercedes-Benz S-Class in February this year. Today, the price cuts in the luxury car market have become increasingly fierce.

Reporters visited the Beijing luxury car market and found that Randy’s RMB 100,000 was already common among mid-range luxury cars. And the value of imported luxury cars worth a million yuan, there are about 300,000 market offers have also been common.

“Economic and market factors have changed the imported car market, which changed the situation of selling, tightness, and Li & Fung last year. In the first half of this year, the luxury car market fluctuates and the business risks are intensified, and the market landscape is reshaping.” Yan Jinghui analyzed.

In the mid-range luxury car, taking the Audi A6L as an example. In an old Audi dealership in Beijing, the reporter learned that three months after the listing, the new A6L has already seen promotions. Dealers told reporters that if there is no urgency to use the car, the preferential margin will further increase in the second half of this year. After the Audi A6L completed its new generation, the sales of the A6L fell slightly in June, with sales of 12,000 units. In May, Audi was in the process of replacement, and the old A6L market discount had reached more than 50,000 yuan, which greatly impacted sales.

"From the rapid growth of the previous two years to the narrowing of the increase since 2012, the luxury car market is undergoing a process of rational return." Market analysts told reporters. In the first half of this year, while the overall performance of the luxury car market was better than that of the overall auto market, the market heat has been significantly reduced.

It is worth noting that, contrary to the cooling of the market, the dependence of luxury car companies on the Chinese market is increasing day by day. In the first half of this year, China continued its position as the world's largest single market for BMW and Audi, and its proportion further increased. A related person in the BMW Group stated that with the listing of the extended version of the new 3 Series in mid-July, the car will become the main force driving sales growth in China in the second half of the year.

While the traditional luxury car brand maintains its traditional dominant position, the new brand that is accelerated to catch up in the Chinese market is even more time-tested. Jaguar Land Rover’s joint venture plant is nearing its feet, and global CEO Schweed frequently visits China, and has recently stated that “China will become the world’s largest market for Jaguar Land Rover in the future”.

In addition, Japanese car companies that have raised the Chinese market to the "most important" position are also trying to expand their market share in China through luxury cars. Infiniti's domestic production has entered a countdown, and Lexus will also rejuvenate the Chinese market as its strategic goal.

The dealers let profit drop stocks in the market terminal, greatly reduce price concessions to promote the growth of the overall sales of luxury cars, but at the same time, dealers profitability dropped significantly. In the first half of this year, the characteristics that emerged in the luxury car market include multinational auto manufacturers taking the initiative to adopt price reduction and quantity measures, which led to an overall increase in sales volume and economies of scale. In addition, the increase in inventory and sluggish sales forced dealers to make profitable sales to quickly digest inventory. Accelerate the circulation of capital, ensure the safety of capital chain and normal operation of the company.

But price cuts are a double-edged sword. The sharp price cuts aggravated the wait-and-see mood of the luxury car market. At the same time, the ever-increasing number of luxury car sales outlets diverted the target customer market. The growth in the number of single-store customers was weak and even declined. At the same time, substantial profits were squeezed out of the profit margin of bicycles, and the actual profit of distributors shrank.

From the perspective of demand, market analysts believe that the slowdown in macroeconomic growth has had a greater impact on the growth of luxury car demand.

Perhaps aware of the heavy risks in the market, some luxury car companies began to appear "return to rationality" trend. FAW-Volkswagen's general manager of the Audi Division, Bo Shi told reporters in an interview, bluntly: “We have anticipated the declining trend of the premium car market. The Chinese luxury car market will be more important than ever in the second half of this year.”

“From the perspective of product supply, the current German headquarters has realized that the slowdown in the Chinese market has slowed down and reduced the supply to the Chinese market. The model structure introduced into China in the second half of the year will also undergo a new adjustment, with small-displacement and energy-saving products as the mainstay. New directions for the introduction of new products,” Mercedes-Benz (China) told reporters.

However, as domestic models continue to increase, the influx of new brands continues to stimulate the increase in the capacity of the Chinese luxury car market. But how big this market capacity is, this serious problem has been thrown at the bosses of various luxury car dealers.