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Car Market Competition Moves up to Luxury Brands

China's luxury sedan market is expected to see fierce competition in 2005 as more auto manufacturers are vying for a share in the emerging and lucrative market.


"Auto giants are set to rival with each other for the country's premium car market in 2005, " said Li Wu, general manager of the sales operation of FAW-VW, based in Northeast China's Jilin Province.


German luxury car brand, BMW, one of the major rivals to Audi in the Chinese market, cut the retail prices last week for its three and five series sedans by 12 or 13 percent, with a decrease of as much as 100,000 yuan (12,048 US dollars) for BMW 530i.


Experts here projected that starting from 2005, the country's luxury car market will be diversified with more and more premium sedans of top foreign brands to be produced locally.


China's luxury sedan market, which now has three locally-produced premium auto brands, Audi, BMW and Nissan-Teana, was hardly optimistic in 2004 due to restrictions such as price, consumption market and bank loans, as the sales of China-made premium sedans saw a decline against the backdrop of 13.2 percent growth in the country's sedan sales.


Audi maintained the dominance of China's locally-made premium sedan sector in 2004 by selling 50,900 cars from January to November while BMW and Nissan-Teana respectively sold 8,300 and 2,936, according to statistics released by the China Association of Automobile Manufacturers.


In the past few years, the price for car import license has been pushed so high that import premium sedans were stunningly expensive. Thus locally-produced Audi, due to its price advantage, saw a steady expansion in the output and sales.


However, Audi has lost its price advantage due to the steady decrease in the price of imported luxury sedans in 2004, as a result of the successive introduction of locally-made BMW and Nissan-Teana and scheduled removal of import quotas at the end of 2005.


Audi in 2004 experienced a significant decline in sales despite a large price. Also the sales of locally-made BMW and Nissan-Teana were also far from optimistic.


The country has a huge potential market yet to be tapped. Luxury sedans are supposed to account for 8 percent of the total auto market in line with international standards, so that sales of middle-grade and premium sedans on the Chinese market are estimated to hit 170,000 units in this year's 2.3-million-unit market, compared with last year's total sales of less than 70,000 units.


More and more auto manufacturers are joining the country's premium auto market in a bid to grab the fast-growing market. In 2005, at least six top auto brands including BMW, Benz, Toyota-Crown, Cadillac, Buick and Nissan-Teana will challenge Audi's dominance in the country's luxury sedan market.


GM, the world's leading auto giant, is set to introduce China-made Cadillac CTS to China early this year with the debut of Cadillac CTS priced at 518,000 yuan (62,409 US dollars) in August 2004.


Shanghai GM launched on Dec. 17 the Buick Royaum, a luxury executive sedan, and plans to first introduce in March Royaum GL2.8 and Royaum GS3.6 into dozens of local markets such as Beijing and the commercial hubs of Shanghai, Guangzhou and Shenzhen.


Daimler Chrysler is expected to raise the output of Benz E and C-class sedans to 25,000 units this year and is scheduled to put into operation a new workshop located in Beijing Yizhuang Economic Development Zone in July 2005.


Japanese leading auto manufacturer Toyota Motor Corp. has stepped up the efforts to increase its presence in China's auto market. The auto giant, in cooperation with FAW, is expected to introduce Toyota-Crown to China this year.


Nanjing Fiat plans to introduce and produce LANCIA-Thesis, the flagship luxury sedan of well-known European top auto brand LANCIA.


Experts say the price of premium sedan will inevitably drop as more premium auto brands tussle over the market shares, which as a result will put greater pressure on small and medium-sized auto manufacturers and shake up the middle and low-price-level sedan market.


There still remains a piece of puzzle where China's auto market goes in 2005. But one thing is clear, auto manufacturers have rolled up their sleeves and braced themselves up for market challenges.


(Xinhua News Agency January 27, 2005)


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