Full-Size SUV’s Gain Traction in Chinese Market

February 27, 2012 by · Leave a Comment 

In 2005, Mercedes-Benz took a gamble and shipped its first batch of 200 sport utility vehicles from Germany to China where cheap hatchbacks and black sedans ruled the roads, according to a report by MSNBC.

“I was in the headquarters and my predecessor made this decision,” said Klaus Maier, the company’s China boss. “We were wondering whether we could sell this car.”Candy Slide rental

They shouldn’t have worried. Seven years later, SUVs — from modest Hyundais to gleaming, $500,000 Range Rovers — are muscling aside smaller cars on China’s crowded and chaotic streets.

Chinese consumers bought 2.1 million SUVs last year, up 25.3% from 2010 and representing 11.6% of light vehicle sales, according to J.D. Power and LMC Automotive. That is about half of the 4.1 million SUVs sold in the United States, where SUVs – a key primary vehicle for RVs –  were 32% of the light vehicle market.

The increase in sales illustrates China’s car market is maturing, analysts say, and presents another opportunity for foreign makers to expand their presence in China.

Mercedes sold 54,000 SUVs in China last year and the cars accounted for 27% of its total China sales in 2011, a nearly two-fold percentage point increase since 2007.

“SUV is certainly the growth segment in China and the manufacturers are on to this,” said William Russo, an industry veteran who runs the consultancy firm, Synergistics, in Beijing. “We will see more and more SUVs actually built in China.”

In many ways, the Chinese infatuation with gas-guzzling SUVs is an unlikely one. Most car owners live in crowded, urban areas, with few opportunities for the rugged, dirt-road driving that features in car advertisements. But sitting high above the traffic in an expensive off-road vehicle has an appeal in China’s status-conscious society, especially for younger buyers.

Land Rovers crowd Cao Jinwei’s showroom in Beijing where the long-time dealer says he increasingly sells to wealthy, younger customers.

“I could only sell about four or five Land Rovers every month back in 2005, but now I can do nine or 10,” said Cao. “Our clients were mostly middle-aged business owners at the time, but now, more and more young professionals, accountants and engineers in their 30s are also buying Land Rovers.”

SUV sales also reflect a changing market, according to analysts.

“The Chinese market has now reached a more mature level. The buyers who are coming in are not as much first-time buyers,” Russo of Synergistics said. “When you buy your second car, you tend to look for more variety. It’s bought for the family. It’s bought to do more recreational things. That’s a pattern we’ve seen in many other markets.”

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