China's luxury auto segment has been slowing, but the world's largest auto market still is beckoning as a No. 1 priority to any serious premium brand. And increasingly, China's own luxury carmakers are targeting the rest of the world with their own wares.
Mercedes-Benz, for instance, has outlined a turnaround plan for China where it badly trails its chief rivals, Audi and BMW. Mercedes plans to launch about 20 new or upgraded models in China over the next two years and also vows to greatly boost domestic manufacturing in China, which avoids a slew of expensive tariffs and taxes that are levied on imported cars.
Meanwhile, Geely, the Chinese company that acquired Volvo, plans to take the bold step of exporting cars that it jointly develops with the Swedish brand to the United States in 2016. That step would come a decade after the company first expressed such a goal.
Mercedes-Benz's sales in China of about 206,000 units last year were only about half that of Audi and about two-thirds the China sales of BMW. Audi, part of Volkswagen Group, targeted China much earlier than Mercedes and now builds about nine out of 10 vehicles in China that it sells in there. Audi and BMW also have been aggressive with pricing in the Chinese market.
Mercedes hopes to catch up with new models and by spending $2.7 billion over the next two years as it seeks to boost sales in China to more than 300,000 cars a year by 2015. More broadly, Mercedes-Benz also is playing catchup with its key rivals globally with a new "2020" plan that Daimler CEO Dieter Zetsche says will put Daimler back in the thick of competition for worldwide luxury-market supremacy within seven years.
One key to the plan in China is that executives believe Chinese luxury buyers no longer demand that a Mercedes-Benz must be German-made. "The quality of vehicles and engines you get out of our Chinese production is the same identical levels of quality ... as our cars being produced in Germany," Hubertus Troska, Daimler's new China chief, told Automotive News Europe.
And of course, while China's luxury-auto segment has been cooling somewhat, it remains a target not only for the Germany-based premium car brands but also for Lincoln, which is new to the market, Buick, Cadillac, and Japanese luxury brands
Geely executives believe that they're much better equipped to enter the US market with Volvo models than a decade ago when Geely was the brand they tried to peddle. Geely displayed at the North American International Auto Show in Detroit in 2006 but never actually broke into the American market.
This time, Geely is banking on Volvo's continued brand equity in the US and its reputation for safety and reliability to compete in a very mature premium market. Previously, Geely—whichacquired troubled Volvo from Ford in 2010—wanted to keep its Chinese and Volvo marques separate because of concerns that mingling them would diminish Volvo's image.
But "our acquisitin of Volvo enhanced our image and overseas consumers are seeing us as an international company," Gui Shengyue, CEO of Geely, told Automotive News.
Maybe. But is Geely as a company really on the radar of more than a tiny fraction of Americans? Geely will only know how a Chinese-owned Volvo brand will play in the US and other developed markets once it brings in the cars.
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