China As An Export Market? No Problem, As Long As You Are German

Bertel Schmitt
by Bertel Schmitt

Nick Taylor’s layman’s observations of American cars in China are a great first impression view. But first impressions can be deceiving. It is true that the Chinese auto market is very much similar to the U.S. market. They love 3 box “real cars” (trend recently shifting a bit), they love SUVs, they love big cars if they can afford them. “American” cars, mostly Buicks, Chevys and a smattering of Fords on Chinese roads are mostly made in China. Just like the “German” or “Japanese” cars that are made mostly in China.

China as an export market for U.S. cars is a whole other matter. China has a 25 percent tariff on imported cars. That pretty much limits car imports to segments where price doesn’t matter, or where a high price acts as a differentiator from the riff-raff: Luxury cars. And this is where Europe reigns supreme.

People’s Daily reports today that “a study released by Bain & Company last week showed that China’s consumer luxury goods market is outpacing every other luxury market in the world, with a projected growth of 23 percent this year.”

An earlier report from the Chinese Academy of Social Sciences had forecasted that by 2015 China will become the No 1 market for luxury goods, with annual sales of $14.6 billion. When that study was released, China was second only to Japan.

Looking at the important players in the Chinese premium car market reveals mostly German names.

  • End of September, Mercedes-Benz announced an unprecedented explosion in Chinese sales. In October, Mercedes said China would be its No 1 market by 2015.
  • The same month, Audi saw its millionth car roll off the production line. By 2013, another million is predicted.
  • In November, BMW released news that within the next 5 to 10 years, China will be its largest market globally.

Even these numbers are mixes of local production and imports. The “lesser models,” BMW 3 series, Mercedes E-Class, everything up to Audi A6, are made in China.

The true luxury models, the Mercedes S-Class, the BMW 7-series, the Audi A8 etc. are imported. The upper crust of the luxury cars, the Bentleys, Rollers and occasional Maybachs must be imported, otherwise, they would be unsalable.

To penetrate China as an export market for American cars, America would have to deliver true luxury, which it simply does not have. There is a small market for high end American SUVs, such as the Escalade. Hummers sold quite well in China while they lasted. But as long as the American buyer has to pick a foreign import if true luxury is on the shopping list, China, the world’s largest car market, will not be a meaningful export target for American cars.

Nick Taylor had it right: If you want to export Made-in-America cars to China, push BMW X6es.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • EBFlex China can F right off.
  • MrIcky And tbh, this is why I don't mind a little subsidization of our battery industry. If the American or at least free trade companies don't get some sort of good start, they'll never be able to float long enough to become competitive.
  • SCE to AUX Does the WTO have any teeth? Seems like countries just flail it at each other like a soft rubber stick for internal political purposes.
  • Peter You know we’ve entered the age of self driving vehicles When KIAs go from being stolen to rolling away by themselves.
  • Analoggrotto TTAC is full of drug addicts with short memories. Just beside this article is another very beautiful article about how the EV9 was internationally voted by a renowned board of automotive experts who are no doubt highly educated, wealthy and affluent; the best vehicle in entire world. That's planet earth for you numbskulls. Let me repeat: the best vehicle in the world is the Kia EV9. Voted, and sealed, and if you try to deny it Fanny Willis is ready to prosecute you; but she will send her boyfriend instead because she is busy.
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