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Premium Car Segment Expected to Lag Market: BMW

German automaker BMW expected China's premium car segment to generate slower growth than lower-priced down market models this year, said Eberhard Schrempf, head of its Chinese joint venture.


But it stuck to its goal of boosting 2005 sales at BMW Brilliance Automotive Ltd., its venture with Brilliance China Automotive Holdings Ltd. that makes 3-Series and 5-Series BMW cars for the Chinese market.


"The premium segment has a good future. However, I think this year we will see in the premium segment smaller growth than in the other segments," said Schrempf.


"For our 3-Series in China the middle class is not yet where we see that in other countries."


Chinese car sales grew just 15 percent last year, after almost doubling in 2003, and analysts expect sales in the world's third-largest vehicle market to grow by only 10 percent this year.


The head of Ford Motor Co.'s Volvo Car Corp. said he expected China's premium car segment to probably triple over the next five years, thanks to breakneck annual economic growth and an increasingly cash-rich and style-conscious middle class.


Premium brands make up just 5 percent of China's car market, where 2.3 million sedans were sold last year, versus more than 10 percent in a developed market such as the United States.


BMW targets annual sales of 30,000 units from the venture in northern China. "Whether we will achieve that in the next five years I don't know exactly," said Schrempf.


Cars made by the venture accounted for 8,660 unit sales in China last year.


Schrempf stressed that a 3-Series BMW made in China had "absolutely the same level" of quality as the same model built in Germany, but added manufacturing costs were slightly higher in China because of lower volumes.


BMW was trying to convince local buyers that the premium segment was not just for chauffeur-driven models, a perception that gave rival and segment leader Audi a competitive advantage with its stretched A6 model.


Brilliance, China's top minibus maker, had hoped to sell 18,000 BMWs last year to complement sales of its own slow-selling Zhonghua sedans.


BMW's sales in the Chinese market fell 10.2 percent to 24,321 units last year as the Chinese Government cooled redhot demand for cars.


"The BMW group nevertheless expects to record above-average sales volume growth rates on the Chinese market in the coming years," it said in its 2004 annual report.


(Shenzhen Daily April 22, 2005)



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