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Super luxury cars skid into social, fuel barriers

By Lu Nengneng | May 20, 2013, Monday | Print Edition

AFTER years of forging ahead, sales of imported super luxury cars in China have suddenly hit the brakes, and the skid goes beyond just changing consumer tastes.

In the first quarter of 2013, sales of super luxury cars dropped 35.2 percent to 915 units in China. That compared with 54.4 percent growth in the same period of last year, according to the state-owned China Automobile Trading Co.

With China's economy now in the throes of a slowdown, a cooling luxury market is hardly surprising. But fading buyer interest, following spectacular sales growth of 154.6 percent in 2010 and 80 percent in 2011, may also be related to the government-led campaign against conspicuous consumption, particularly among public officials.

"There have been worries swirling around that China may impose higher consumption taxes on super luxury cars," said Wang Cun, manager of marketing at China Automobile Trading.

If so, he added, the big luxury brands will suffer.

In response to such rumors, the Ministry of Finance has told media that there is room for "tax adjustment" on these luxury products, but it gave no hints about how policies might changed or when.

Stephan Winkelmann, president and CEO of Lamborghini, earlier said super luxury cars could maintain a stable sales level this year if higher taxes are not imposed.

Zhang Bin, director of tax studies at the Chinese Academy of Social Sciences, said he doesn't think higher taxes would make all that much difference. Wealthy people aren't very price sensitive, he said.

"It could cool the market in the short term, but not in the long run," Zhang said of higher taxes.

If taxes don't hit hard, tighter limits on fuel economy could.

Beginning this month, all passenger car companies in China are required to meet the average fuel consumption level set by the government. Super luxury brands, which are often gas-guzzlers, have always been able in the past to meet tighter fuel economy standards by teaming up with other brands that produce smaller displacement cars. But under the new regulation, alliances to average out displacement won't be allowed.

Cui Dongshu, deputy secretary-general of China Passenger Car Association, said it will be hard for China to meet its target of bringing down average fuel consumption of passenger cars to 6.9 liters in 2015 and to 5.0 liters in 2020, given the current higher level.

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