Beijing Auto Show: Chinese Luxury Wars Heat Up As German Brands Push Stretch Appeal

As Bertel Schmitt has exhaustively documented, the Chinese luxury car market is hot fire right now. By 2015, luxury sales are expected to quadruple to 2m annually, making China the most important growth market in the world for brands like Audi, BMW and Mercedes. Having landed early, thanks to Volkswagen’s pioneering presence in the Chinese market, Audi is the king of Chinese luxury car brands, and isn’t showing any signs of quitting. And though 77 percent sales growth last quarter is nothing to sneeze at, longer-term trends show Audi’s market share sinking inexorably as its rivals fight hard for a toehold in the lucrative Chinese luxury game. According to BusinessWeek, Audi’s Chinese market share has skidded more than 20 percentage points since 2004, falling from a dominant 66 percent to a mere 42 percent last year. Can BMW and Mercedes continue to make gains? The only certainties are that they will try, and it won’t be easy.

Perhaps the most important lesson learned by Audi in its decades in China is the importance of rear legroom. Rather than selling global models in China, Audi has had the most luck with China-only stretched version of its A6 sedan that initially gained favor as the car of choice for Beijing’s aparatchiks. Exactly why Chinese culture places such an emphasis on large, chauffeured sedans isn’t immediately clear to this laowai, but the reality is undeniable: The A6L made up over half of Audi’s record Q1 sales, while the a more recently-introduced A4L shows signs of catching up.

In hopes of making continued inroads into Audi’s sales, Mercedes and BMW are using this year’s Beijing Auto Show to debut extended-wheelbase versions of their E-Class and 5-Series. The stretched E-Class is almost certain to make it to production, as Daimler tries to pull itself out of third place in both the Chinese and global luxury sales race. The BMW is being shown as an EV concept, jointly developed with Tongji University, and as such won’t be built as the EV it is being shown as. But BMW is quick to emphasize that the LWB 5-Series is headed for production as a “built in China, by China, and for China” model. In the white-hot Chinese luxury market, this is the name of the game.

Audi, meanwhile, already has the stretched E-segment sedan it needs, and is busy expanding its brand upwards to facilitate further growth. Accordingly, it’s major debut in Beijing is a stretched “L” version of its A8 flagship sedan, which will be a global model but is likely to sell more volume in China than any other market. Audi may no longer enjoy the near-monopoly it once had in the Chinese luxury market, but it ain’t going anywhere either.