China Luxury Car Market - Growth, Trends, and Forecasts (2020 - 2025)

The China Luxury Car Market is segmented by Vehicle Type (Hatchback, Sedan, and Sports Utility Vehicles) and Drive Type (IC Engine Vehicle and Electric Vehicle).

Market Snapshot

Study Period:

2019-2025

Base Year:

2019

CAGR:

7 %

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Market Overview

The China Luxury Car Market is anticipated to register a CAGR of over 7% during the forecast period 2020 - 2025.

  • According to the China Association of Automobile Manufacturers, from January 2018 - November 2018, the total vehicle sales fell by 1.7%, compared to the same period a year earlier, however, China’s premium car market still maintained stable growth in 2018. The luxury car market is concentrated and is being dominated by Mercedes-Benz, Audi, and BMW. The three luxury vehicle manufacturers sold more than 1.95 million units in 2018.
  • Irrespective of the weak market sentiment, consumer confidence remained string and the country witnessed high demand for luxury cars in November 2018. Additionally, with the consistent rise in income and the supporting high demand for premium cars, the manufacturers of luxury vehicles reported positive sales figures from November 2018.
  • Additionally, the growth of luxury car demand among young people is also driving the growth of the market.
  • The luxury car manufacturers are currently selling Level 3 and 4 vehicles, focusing on conditional automated and highly-automated advancement, along with connected service that is being provided between smartphone and vehicle, which is further boosting the sales of luxury vehicles.
  • However, the growth of the market restrained in first half of 2020, due to spread of COVID-19 disease. The nationwide lockdown imposed by the government restrained the movement of buyers and disrupted the supply chain of major automobile manufacturers causing them to temporarily close their production facilities, therefore causing decline in sales of luxury vehicles.

Scope of the Report

The China luxury car market covers all the latest R&D initiatives, investment done by the government, and vehicle manufacturers across the country. The report studies the latest technological trends, market share of luxury vehicle manufacturers across the country.

Vehicle Type
Hatchback
Sedan
Sports Utility Vehicle
Drive Type
IC Engine Vehicle
Electric

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Key Market Trends

Premium Automakers and Second-Tier Brands Gaining Market Traction

In 2018, the sales volume of the Chinese luxury car market reached 2.82 million units, a year-on-year growth rate of 8%, however, the growth rate was relatively slow. In 2017, the sales volume of the market was 2.61 million units, a year-on-year growth rate of 17%.

In order to increase luxury car sales, the Chinese government has decided to implement VAT drop policy for the manufacturing industry which prompted the major premium car brands in the country, like Audi, Mercedes-Benz, BMW, Jaguar Land Rover, Volvo, Lincoln, and Infiniti, have already decided to cut suggested retail prices on models sold in China, however, it cannot be anticipated that whether the price cut may boost sales performance in the future.

In 2019, BMW became the leading brand in the country, with sales of a total of 723,680 units which is a 13.1% increase compared with 2018.

Whereas Mercedes-Benz saw a drop in sales. Mercedes-Benz registered a year-on-year drop of 5.4% in February 2019. At the end of the year, Mercedes-Benz sold over 693,443 units.

In 2019, Audi recorded a 4.1% growth and sold over 690,083 units. The locally produced premium models like A4L recorded a rise of 3.0% in sales with over 168,189 units sold and Q5 L recorded a rise of 17.0% with over 139,297 units sold.

In February 2019, SAIC-GM saw its sales decline by 38.9% from FY 2018 to 11,007 units, however, the company still held top position in the second-tier luxury car brands.

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Changing Policies and Tax Regulations

The country’s luxury car market is led by European automakers, namely, Mercedes-Benz, BMW, and Audi. As per the recent report from the China Passenger Car Association, the country’s luxury sedan segment grew by approximately 18.8%, in the first 11 months of 2018, when compared to the same period in 2017. Additionally, the premium sport-utility segment increased by approximately 3.5%, between January and November, in 2018.

In terms of policy and taxation reforms, China is considering a tax cut to revive its weakened automotive market. The tax cut may aid the country in supporting its automotive sector, which was dented by the trade war with the United States, as it impacted the consumers spending power.

Irrespective of the aforementioned trade war, the country witnessed a steady growth in luxury car sales. To mitigate the effect of the trade war, companies, such as Mercedes-Benz, Audi, and BMW, are planning to increase its production in China, as the trade war is putting pressure on global luxury brands, including Mercedes-Benz, which exports US-made vehicles to China.

Additionally, luxury auto dealerships, such as Zhongzheng, China ZhengTong, and China Yongda, in order to mitigate the effects of trade wars and increase their profits, are selling non-US made cars. Additionally, luxury car manufacturers are also cutting down the prices of their vehicle models, to increase their luxury car model sales in 2019.

Other initiatives taken by the Chinese government, to boost the automotive sector and increase the sales of luxury cars in the country, are –

The government now allows international automakers to set up more than two joint ventures in the country, and most of the international players already have more than two joint ventures with their Chinese partners. Additionally, they can also set up wholly-owned companies in the country. For instance, in 2019 Tesla Inc become the first international company to operate fully-owned manufacturing plant without a local partner.

Currently, only ultra-premium luxury auto brands are imported in the country, which may benefit from lower import tariffs, as these brands are fully-imported from non-US factories.

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Competitive Landscape

The Chinese luxury car market is highly concentrated and majorly dominated by few players, like Volkswagen AG, Daimler AG, Geely, Toyota Motors, and BMW. Some of the major companies have their manufacturing plants set up in the country, giving them a cost advantage over their rivals, and further, providing a shorter timeline for the dispatch of their produced vehicles.

Volkswagen (including Audi), Daimler (Mercedes-Benz), and BMW are the top three players in the country In absolute terms, it is Volkswagen (Audi) that comes out on the top followed by Daimler (Mercedes-Benz), and then, BMW. But the difference is very narrow, ranging from around 9,000 units to 13,000 units between the second and third place players, respectively.

Other players include Jaguar Land Rover, Zhejiang Geely Holding Group (Volvo AB), Rolls-Royce Holding PLC, Acura, Infinity, amongst others.

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Table Of Contents

  1. 1. INTRODUCTION

    1. 1.1 Study Assumptions

    2. 1.2 Scope of the Study

  2. 2. RESEARCH METHODOLOGY

  3. 3. EXECUTIVE SUMMARY

  4. 4. MARKET DYNAMICS

    1. 4.1 Market Drivers

    2. 4.2 Market Restraints

    3. 4.3 Industry Attractiveness – Porter's Five Forces Analysis

      1. 4.3.1 Threat of New Entrants

      2. 4.3.2 Bargaining Power of Buyers/Consumers

      3. 4.3.3 Bargaining Power of Suppliers

      4. 4.3.4 Threat of Substitute Products

      5. 4.3.5 Intensity of Competitive Rivalry

  5. 5. MARKET SEGMENTATION

    1. 5.1 Vehicle Type

      1. 5.1.1 Hatchback

      2. 5.1.2 Sedan

      3. 5.1.3 Sports Utility Vehicle

    2. 5.2 Drive Type

      1. 5.2.1 IC Engine Vehicle

      2. 5.2.2 Electric

  6. 6. COMPETITIVE LANDSCAPE

    1. 6.1 Vendor Market Share

    2. 6.2 Company Profiles

      1. 6.2.1 Daimler AG (Mercedes-Benz)

      2. 6.2.2 Zhejiang Geely Holding Group

      3. 6.2.3 BMW AG

      4. 6.2.4 Volkswagen Group (Audi AG)

      5. 6.2.5 Tata Sons Private Limited (JAGUAR LAND ROVER LIMITED)

      6. 6.2.6 Rolls-Royce Holding PLC

      7. 6.2.7 Bentley Motors

      8. 6.2.8 General Motor Company

      9. 6.2.9 Tesla Inc.

      10. 6.2.10 Dongfeng

      11. 6.2.11 Infinity (Nissan Motor Co Ltd)

      12. 6.2.12 Acura (Honda Motor Co Ltd)

      13. 6.2.13 Cadillac (General Motors Company)

      14. 6.2.14 China FAW Group Co.,Ltd

      15. 6.2.15 The Lincoln Motor Company

      16. 6.2.16 Lexus (Toyota Motor Corporation)

  7. 7. MARKET OPPORTUNITIES AND FUTURE TRENDS

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