Shanghai Auto Show: As Luxury Cars Fly Off The Lot In China, The Government Pulls The Brakes

by Bertel Schmitt

Published: April 24th, 2011

shanghai auto show as luxury cars fly off the lot in china the government pulls the

At last year’s Beijing auto show, a man walked up to the Roll Royce booth with a suitcase full of “Red Maos” – as the 100 yuan note is called in China, the largest note equals $15.40 – and walked away as the owner of a Rolls Royce Phantom. At least that’s what AFP heard. Because of taxes and duties, a Rolls-Royce Phantom started at 6.6 million yuan ($1 million) a year ago. That translated into 66,000 red banknotes.

At this year’s Shanghai show, no suitcases were proffered. However, “using connections to enter the show on the media preview day, millionaires bought two Rolls Royce Phantoms, which start at nine million yuan ($1.3 million) and four of the new Ghosts, starting at 5.1 million yuan.” The “connections” came cheap. On media days, there is a booming market for press passes outside of the show.

Aston Martin Aston Martin sold one of its super-luxury One-77s for 47 million yuan ($7.22 million.) “We don’t like to say it’s the most expensive car in the show, but we are pretty confident it will be,” Matthew Bennett, the Asia-Pacific director for British luxury car maker Aston Martin told AFP.

Despite a murderous 145 percent tax on imported luxury cars, China’s luxury car sales are expected to rise to more than 909,900 units this year, up from about 727,200 last year, according to forecasts by IHS Automotive.

China’s trend to conspicuous consumption might turn into its downfalls. There is rising public dissatisfaction with a widening wealth gap. The government is sensitive to this and has vowed to pursue more equitable growth in the future. As a first move, the government is clamping down on overly ostentatious displays of affection with dough. Already, Beijing’s government lashes out against billboards that advertise a flamboyant lifestyle. This is widely ignored. Now, Beijing handed down a regulation that hurts:

Beijing suddenly classified any vehicles beyond 6 meters (20 feet) as commercial vehicles, Automobilwoche [sub] reports. Meaning: They must stay in the truck lane and are banned from the ritzier thoroughfares. A billionaire might not reach his garage in the tonier parts of China’s capital. As an answer, Rolls Royce did not just debut an extended wheelbase Ghost in Shanghai. Rolls also promised a shortened Phantom that skirts the 6 meter limit.

#BertelSchmitt #China #Rolls-Royce #ShanghaiAutoShow2011

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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Ron Phillips on Apr 25, 2011

Gee, I hate to refute perfectly good anecdotal evidence with actual facts, but if you think people in China are making about half of what people in the US make, you're pretty far outside what the rest of us call reality. According to the CIA World Factbook, for 2010 the median income per person in China was $7,400. For the US, $47,400. So more like one sixth, than one half. Now in purchasing power parity terms the amounts are closer, but then we're discussing global competitiveness, in which case local pricing doesn't really matter.

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- Th009 on Apr 25, 2011
  
  @Ron, per capita income is indeed just a small fraction, but for China that's dragged down by the vast numbers of people in the countryside, who live on a relative pittance. Once you get to the big cities, and especially more advanced professions (ie not assembly line), the gap is far smaller than that.
  
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- Tekdemon on Apr 25, 2011
  
  The problem here is that you're ignoring the fact that there's simply more people in China, so while you may see a low average or low median there's still several hundred million people who make much higher wages. Your median might be $7400 but there are 750 million or so people who make more than the median. Basically their upper quartile of income earners is more or less equal to our entire population, so you in fact have a very high chance of knowing lots of people who have seen their incomes catch up with U.S. income levels. I know several people who make incomes in China that would be considered middle-class or upper middle class in the U.S. and 10 years ago that simply wasn't possible. As far as things like cars go it matters a lot more what that top quartile of people are making than what the median income is. You basically want to see more and more people make the minimum amount needed to start buying things like cars, but to be honest I think it'd be an environmental and traffic nightmare if this rate of growth keeps up. The larger cities are traffic nightmares in China. You can't really just look at the median or the average or you won't really understand why more cars are sold in China than in the U.S. Their population is so large that in the future even though their median or average income won't be higher than ours, they'll have more people with higher incomes than ours because our population can fit in theirs like 4 times over. And purchasing parity power certainly does matter, because you can save up for things like cars and luxury goods way easier in a place like China. Most middle class people there can afford to have help around the house because while they're fairly well off there's still hundreds of millions of people making the lower numbers you're citing. When you can meet your basic needs with only a tiny fraction of your $40,000 a year income it's a lot easier to save up for that new car as compared to the U.S. where you'd be spending most of your $40,000 just to pay your rent and feed your family.
  
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Accs on Apr 27, 2011

I think its fantastic that this yahoo can walk into a show and walk off with another generically painted R.R... However.. Knowing how those people drive... how long ya think its gonna be till he plows someone, or gets plowed himself?

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