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Makers focus higher as small-car support ends
By Xiao Jin |
April 19, 2011, Tuesday
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THE focus of automakers in China has switched from the low-cost end of the market to the mid-to-high class segment after the expiry of government subsidies on the purchase of small, energy-efficient cars.
Last week, Hyundai Motor Corp rolled out the eighth generation of its Sonata sedan in China.
Beijing Hyundai Automobile Co, the South Korean car maker's joint venture with Beijing Automotive Industry Corp, said the model marks ambitions to expand into costlier models and hailed the Sonata as a means of lifting Hyundai's brand image in the world's largest car market.
The Sonata will be followed by a slew of competitive models later this year, including Shanghai Volkswagen's new Passat, Peugeot 508, a long wheel-based VW Magotan B7L and the Chevrolet Malibu.
This year is shaping up as the most intensive for new car launches in the past five years, with car makers betting on solid profits from the higher end of the market.
In March, car sales in China rose 6.5 percent to 1.35 million units, including sedans, sports utility vehicles and multi-purpose vehicles, according to the China Association of Automobile Manufacturers.
Although sales in the month rebounded from February's slowest growth rate in two years, they were still well below the 70 percent sales surge in March 2010.
Cars with engine sizes of 1.6 liters or smaller accounted for 69 percent of March sales, down 1.27 percentage points from February.
Most industrial analysts said the withdrawal of the government's small-car subsidies this year has made those vehicles less appealing to consumers. The end of subsidies coincided with cities such as Beijing imposing restrictions on vehicle registration to cope with traffic gridlock and pollution. Auto buyers who still qualify for registrations appear to be opting for more expensive models.
According to a research from the Beijing Asia Olympic Village Auto Trading Market, about 60 percent of 2,700 auto buyers it surveyed said they intended to increase their purchase budgets by between 50,000 yuan (US$7,633) and 100,000 yuan.
"Mid-to-high class sedans with spacious interiors, advanced equipment and superior exterior design are catching the most attention," said a Beijing car dealer Wang Hui.
China's mid-to-high class segment has been dominated by Toyota's Camry, Honda's Accord and Nissan's Teana, But as the array of offerings increases, competition is heating up.
Cui Dongshu, deputy secretary-general of the China Passenger Car Association, said the March 11 earthquake and tsunami in Japan has also provided opportunities for other car makers to get a bigger slice of the lucrative market.
Indeed, most car makers reported sizzling sales in the first quarter for cars in the mid-to-high class segment.
Ford Motor Corp said sales of its new Mondeo sedan exceeded 7,000 units in the first month after the model was launched in mid-March.
However, the new segment thrust is not without its risks, analysts pointed out. Rising oil prices are pushing up prices at the fuel pumps, and there's also a revised government vehicle tax on cars with engine sizes 2 liters or bigger, they noted.
With more cars entering the market, price competition is inevitable.
Hyundai priced the Sonata at 166,900 yuan, compared with an earlier price range of 190,000 to 250,000 yuan.
Dealers have offered 36,000 yuan discounts on the Mazda 6 sedan, which is now selling at below 150,000 yuan -- the lowest price in its class.
Last week, Hyundai Motor Corp rolled out the eighth generation of its Sonata sedan in China.
Beijing Hyundai Automobile Co, the South Korean car maker's joint venture with Beijing Automotive Industry Corp, said the model marks ambitions to expand into costlier models and hailed the Sonata as a means of lifting Hyundai's brand image in the world's largest car market.
The Sonata will be followed by a slew of competitive models later this year, including Shanghai Volkswagen's new Passat, Peugeot 508, a long wheel-based VW Magotan B7L and the Chevrolet Malibu.
This year is shaping up as the most intensive for new car launches in the past five years, with car makers betting on solid profits from the higher end of the market.
In March, car sales in China rose 6.5 percent to 1.35 million units, including sedans, sports utility vehicles and multi-purpose vehicles, according to the China Association of Automobile Manufacturers.
Although sales in the month rebounded from February's slowest growth rate in two years, they were still well below the 70 percent sales surge in March 2010.
Cars with engine sizes of 1.6 liters or smaller accounted for 69 percent of March sales, down 1.27 percentage points from February.
Most industrial analysts said the withdrawal of the government's small-car subsidies this year has made those vehicles less appealing to consumers. The end of subsidies coincided with cities such as Beijing imposing restrictions on vehicle registration to cope with traffic gridlock and pollution. Auto buyers who still qualify for registrations appear to be opting for more expensive models.
According to a research from the Beijing Asia Olympic Village Auto Trading Market, about 60 percent of 2,700 auto buyers it surveyed said they intended to increase their purchase budgets by between 50,000 yuan (US$7,633) and 100,000 yuan.
"Mid-to-high class sedans with spacious interiors, advanced equipment and superior exterior design are catching the most attention," said a Beijing car dealer Wang Hui.
China's mid-to-high class segment has been dominated by Toyota's Camry, Honda's Accord and Nissan's Teana, But as the array of offerings increases, competition is heating up.
Cui Dongshu, deputy secretary-general of the China Passenger Car Association, said the March 11 earthquake and tsunami in Japan has also provided opportunities for other car makers to get a bigger slice of the lucrative market.
Indeed, most car makers reported sizzling sales in the first quarter for cars in the mid-to-high class segment.
Ford Motor Corp said sales of its new Mondeo sedan exceeded 7,000 units in the first month after the model was launched in mid-March.
However, the new segment thrust is not without its risks, analysts pointed out. Rising oil prices are pushing up prices at the fuel pumps, and there's also a revised government vehicle tax on cars with engine sizes 2 liters or bigger, they noted.
With more cars entering the market, price competition is inevitable.
Hyundai priced the Sonata at 166,900 yuan, compared with an earlier price range of 190,000 to 250,000 yuan.
Dealers have offered 36,000 yuan discounts on the Mazda 6 sedan, which is now selling at below 150,000 yuan -- the lowest price in its class.
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