Intl brands gain most as car sales rise

Automobile sales in China grew at their fastest pace in five months in August, with European carmakers making considerable headway in a robust market that posted growth of more than 10 percent.

Last month, more than 1.22 million passenger cars were sold in China, including sedans, multi-purpose vehicles, sport utility vehicles, and minivans, according to figures released by the China Association of Automobile Manufacturers.

The numbers represent a year-on-year growth of 11 percent.

Cumulative vehicle sales during the eight months reached 9.95 million, a year-on-year increase of nearly 8 percent.

Sales of commercial vehicles, however, fell by 8.9 percent to 2.5 million, largely due to the slowdown in the Chinese economy and the cancellation of many major projects since last year.

SUV sales continued to be the mainstay of the market in China, notching up a 30 percent rise in sales to 1.27 million units.

FAW-Volkswagen, German auto major Volkswagen Co's passenger car joint venture in China, took pole position in August sales with 114,700 car deliveries, followed by SAIC-GM and SAIC-Volkswagen with 109,800 units and 87,900 units.

The top 10 auto manufacturers accounted for more than 70 percent of the total market share, with 593,000 deliveries, according to the CAM figures.

Volkswagen Group delivered 83,406 cars in August, up by 15.5 percent year-on-year. By the end of August, the company had sold more than 636,840 cars, 12 percent more than the previous year, while its Chinese joint venture partners FAW-Volkswagen and SAIC-Volkswagen were the leaders in the overall Chinese auto market.

Figures released by Mercedes-Benz show that the brand sold 134,810 cars during the eight months in China, up by 9 percent year-on-year.

"With more B-class models expected to be introduced in China this year, Mercedes-Benz hopes to maintain the good sales momentum," said Klaus Maier, chief executive officer and president of Mercedes-Benz China.

BMW also remained high on the perch among European brands, as well as in the premium car market. With total deliveries of over 25,400 units (with around 23,500 BMWs and 1,900 Minis), BMW had its best August ever in the China. The sales numbers represent a 37.5 percent growth over 2011.

Audi AG, another major premium brand of Volkswagen group, sold 34,800 cars in China, a year-on-year increase of 24 percent, while sales during the eight months rose by 33 percent to 261,548 units.

With the government gradually implementing stricter environmental standards, European auto brands have started to adjust their product lines in China.

Audi has been the spearhead in introducing new energy vehicles. Earlier this year, it introduced a model Q5 hybrid quattro, which claims to save up to 23 percent in energy compared with gasoline-powered vehicles.

Yao Chunde, a professor from State Key Laboratory of Engines at Tianjin University, said it is now better for auto majors to incorporate new energy features into high-end models, as the target customers in the segment are not so sensitive to price.

"Customers looking for vehicles priced higher than 200,000 yuan ($32,000) tend to be more environmentally conscious and they value renowned international brands more," Yao said.

Due to the high research and development costs, energy-saving vehicles, especially electric vehicles, are priced higher than other models, which has had a drag on sales.

Richard Wang, marketing manager of China Automobile Trading Co Ltd, said European brands have been the ones to benefit from the soaring demand for luxury vehicles from the middle class.

"Premium brands are growing much faster than mid to low-end ones in China," Wang said.

"And a large portion of sales are European brands, such as Mercedes Benz, Audi and BMW."

Reacting quickly to the government's policy on encouraging greener vehicles, is another reason for the ongoing success of European brands in the Chinese market, he said.

"As they already have good experience in new energy technology, they can easily transform this knowledge into their product designs, switching their direction to meet the government requirements."

He said Audi and BMW have already shifted market focus to lower emission models and the new Mercedes-Benz B-class has also adopted the 1.6 L engine.

The success of foreign car brands has, however, squeezed the market for local brands.

Over the past eight months, sales volumes for local brands - which still account for 40.3 percent of the total passenger car sales - have declined by 2.4 percentage points over the same period of 2011.

In contrast, during the same period, German brands have increased their market share by 2 percentage points.

Analysts believe local brands will continue to have a tough time as joint-venture brands are now reaching out to the lower-end markets, which used to be the mainstay of Chinese brands.

Rao Da, secretary-general of China Passenger Car Association, estimates that September will be a better month for dealers with some favorable policies expected to come into force in the next two months.

The Chinese government issued a policy last month exempting passenger cars with less than seven seats from tolls during major holidays, which will come into effect in October.

China's economic growth is expected to recover mildly during the third quarter, another good sign, given the auto market generally mirrors the macro-economy, Rao said.

But he adds the growth rate of the auto market may not be as impressive as it was last year, when consumers rushed to buy cars before the government subsidies for energy-saving cars expired.