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CAR TECH
Luxury auto party over in China as growth slows, graft drive bites
By Bill SAVADOVE
Shanghai (AFP) April 21, 2015


When Italian luxury carmaker Maserati entered China a decade ago, with a brand virtually unknown to Chinese customers, it sold fewer than 40 vehicles its first year.

Last year, the Asian giant was Maserati's second largest market as sales of its sports cars -- including the Quattroporte, which can cost up to $377,000 -- reached 9,400, more than doubling from 2013.

But now its chief executive acknowledges it will struggle to even maintain that level this year.

The party is over for the luxury car market in China, with the country facing the slowest economic growth in a quarter of a century and a corruption crackdown orchestrated by Communist Party chief Xi Jinping.

"Last year was fantastic," said Maserati boss Harald Wester, sipping a mineral water on the roof of a Shanghai art museum ahead of China's premier auto show.

"The target this year is to maintain more or less the volumes of last year -- a very difficult task. We all know about the slowing down of growth," Wester said.

The world's second-largest economy expanded 7.4 percent last year, its slowest since 1990.

So Maserati is buckling down in China, servicing existing customers, building its dealer network and awaiting the arrival of its Levante SUV (sports utility vehicle) in 2016.

Maserati executives say their Chinese customers are young entrepreneurs, nearly half female, and deny they are selling to government officials who might be caught in the much-publicised anti-graft campaign, now two years long.

But the crackdown is making ostentatious displays less popular, which could affect sales.

"When the entire society is pointing at some people as having much more than others, potentially those (people) hesitate to show it," Wester said.

- Daimler, Rolls-Royce -

Photos posted online of the wreckage of lime green Lamborghini and red Ferrari that crashed drag racing on the streets of Beijing earlier this month caused outrage, as people questioned who owned the luxury cars.

Germany's Daimler believes it may have hit upon a solution with its new Mercedes-Maybach S600, saying it is under-stated enough to find a market in the new China.

"The Maybach is a really exclusive vehicle, but still almost an understatement," said Hubertus Troska, member of the board of management of Daimler with responsibility for China.

"We feel like it fits actual Chinese times."

The slowdown did not stop Britain's Rolls-Royce from choosing China for the launch of its new Phantom Limelight, which has features including leather-covered accessory boxes and handmade fragrance holders.

"This precious brand... occupies a very special place in the hearts of our customers here in China," Rolls-Royce CEO Torsten Muller-Otvos told the launch ceremony at another Shanghai art museum.

But parent BMW said it had "adjusted" the production of Rolls-Royce specifically because of slower sales in China, which became apparent last summer.

"We have seen some headwinds in the top luxury segment, not only Rolls-Royce but very expensive goods in this country," said Peter Schwarzenbauer, member of the board of management for BMW who has responsibility for Rolls-Royce.

"We adjusted our production because Rolls-Royce is the last brand you want to push: you can't sell a Rolls-Royce, a Rolls-Royce has to be bought."

At the same time, the luxury and slightly lower-priced "premium" segment -- cars costing under $197,000 -- are facing more competition.

In the premium segment, traditionally strong German manufacturers are now being pitted against US brands, such General Motors' Cadillac and Ford's Lincoln.

Lincoln, which only launched in China in late 2014, showed off a concept for its Continental sedan at the Shanghai auto show, as well as two SUVs.

"This year, next year, China could become the biggest luxury car market," Ford CEO Mark Fields confidently predicted.

Analysts said the top-end luxury market might be better placed to ride out the downturn, since premier segment cars that are favourites for government officials and fleet -- such as Audi -- are now being targetted by an austerity campaign.

"There is quite a large segment of China, the young ultra-rich who want a Lamborghini or Ferrari," said Namrita Chow, principal analyst for IHS Automotive in London.

"They're unlikely to be dented by these current scandals."


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