Rich Chinese Fancy Luxury Cars
Ma Chenguang paced around a shiny Range Rover in a downtown Shanghai Jaguar dealership, checking under the hood and sliding into the front seat before declaring that he would take one.
Mr. Ma, a 37-year-old steel trader, is paying nearly $219,000 for a jet-black model with a turbo-charged engine to replace the Mercedes he has been driving. "I want a change," he says.
So do other rich Chinese.
In the 1990s, many in China considered Volkswagens high class. But today, well-to-do Chinese are hankering for Bentleys, Ferraris, Mercedes, Audis, deluxe Cadillacs and even Rolls-Royces, reflecting the nation's growing wealth -- and a new boldness about showing it off.
Luxury cars entered the Chinese market more than a decade ago, but demand was confined to a sliver of the privileged class -- usually high-level bureaucrats and officials -- who had the connections and the money to import the cars from Europe and the U.S. Hardly any high-end vehicles were produced locally.
Lately, though, there has been a boom in luxury-car sales. Showrooms are sprouting across China, and car companies are organizing owners' clubs and hawking fancy branded merchandise to foster brand identity.
Fueling the demand for high-end cars is a growing pool of entrepreneurs and "sea turtles," the Chinese nickname for citizens who have returned to China after years of living overseas. The newly rich are leading the way in casting off decades-old qualms about displaying wealth.
The Chinese who can afford luxury cars still form a tiny community amid the nation's 1.3 billion people. But they wield enormous spending power. And, as the income gap between China's rich and poor grows, those at the top of the economic pyramid have ever more money to shop.
China is such a hot market that BMW AG is planning the world premier of a new high-end car at the Shanghai auto show, which begins next week. DaimlerChrysler AG will be showcasing its high-performance Mercedes-Benz AMG sedans, which will sell for up to $375,000. Other luxury-car makers will also be out in force.
"The rapid growth of affluence in China and the increasing desire for individuality and expressiveness" are making China "the most dynamic market in the world," says Ulrich Walker, chairman and CEO of DaimlerChrysler's Northeast Asia operations.
Since 2004, luxury-car sales in China have more than doubled, says Yale Zhang, an auto-industry analyst with CSM Worldwide. In the first quarter, sales of Audis were up 27% from the same period a year earlier. BMW's first-quarter sales were up 34% to 10,177 vehicles, while Mercedes-Benz sales climbed 16%. The company's largest sedan, the S Class, accounted for about 44% of the vehicles sold.
Mercedes has experienced such a sharp run-up in demand that DaimlerChrysler decided to start manufacturing E Class sedans in China. The first cars started rolling off the assembly line in a factory on the outskirts of Beijing in late 2005. The company will start making C Class sedans in China later this year.
In a sign of how far wealth -- and the desire for the high life -- has spread here, Rolls-Royce recently opened a showroom in Chengdu, an inland city in southwestern China where incomes are still 30% below those in major cities like Beijing and Shanghai.
While still a small part of the population, China's super rich are likely to multiply. Richard Lee, who owns a Ferrari dealership in the northeastern city of Dalian and is a shareholder of the company that imports the Italian sports car into China, reckons there are half a million Chinese with disposable incomes of at least $1 million, the target clients for luxury car companies. And that 0.038% of the population is growing at some 20% a year.
A Rolls-Royce on display in China, where sales of the car rose more than 60% last year. [Photo: wsj.com]
Before Chinese consumers dared to splurge on expensive cars, they were already spending their money on Gucci and Louis Vuitton, fashion labels that entered the Chinese market in the 1990s. Their stores -- and the massive amounts of advertising they did in local magazines -- helped to expose the Chinese to the notion of luxury and high-end living, Mr. Lee says.
The most exclusive car brands are among those experiencing the fastest growth. Jenny Zheng, Rolls-Royce's general manager for greater China, says the company's China sales jumped more than 60% last year from the year before. She says China overtook Japan for the first time in 2006, though she declined to cite actual figures. Globally, the brand has sold 805 cars, each one tailor-made to the owner's demands, she says.
Rolls-Royce's Chinese clients fork out at least $647,000, the cheapest price tag. Most owners want black cars in order to emulate the style of high officials, Ms. Zheng says. Some corporate customers have even asked to have the name of their company's chairman embossed discreetly on the side of their car.
Ferrari, too, has ventured out of the coastal cities. Its latest showroom is Mr. Lee's in Dalian. This region is often labeled China's rust belt, but Mr. Lee says that even here people are getting richer and are quickly shedding their fear of showing off.
Indeed in much of China, having a fancy car has become a critical part of maintaining face. One construction company owner, who gave his name only as Mr. Jiang, says he drives an Audi A8 in part because of the impression it makes on clients. "It's a symbol of my business," he says.
Engineers and designers for General Motors Corp. labor to make Buicks and Cadillacs sold in China more luxe than their North American counterparts. Cars have leather upholstery, lacquered wood trim and technical bells and whistles, such as in-seat TVs and remote controls for the audio and video systems. This week, GM launched the Park Avenue sedan, the top of its Buick line, here. The price tag: $65,000 and up.
Anita Yan doesn't own a car, but she markets Cadillacs to those who can afford one -- or sometimes even two. She says most of her clients are entrepreneurs with established businesses. Very few are salaried workers.
Though wealth is becoming conspicuous, some clients still want to remain low key. Ms. Yan says some people who drop by her showroom aren't actual customers. Instead, they're relatives or employees of clients sent to pick out a car. The owners don't turn up until the day of payment.
Mr. Ma, the steel trader, is blasé about his newly purchased Range Rover. "A lot of people can afford this kind of car these days," he says. "It's nothing special. I just like it."
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