Chinese luxury automobile possesses significant potential for growth

The luxury automobile market in China still possesses large potential for development. Furthermore, with the country now home to 26,600 multimillionaires, the second largest number in the world, automobile manufacturers from across the world have their eyes set on increasing their market share. Most of them have already begun or are planning to begin developing vehicles directly in the country to achieve their sales goals.

Chinese automobile sales over the first half of this year totaled 1.17 million vehicles, representing year-on-year growth of 8.36 percent. That growth figure rate was even higher for luxury automobile sales, reaching 32 percent. A total of 808,000 luxury automobiles have been sold in the country since the beginning of the year.

What is even more noteworthy is that Chinese luxury automobile sales account for only seven percent of all automobile sales in the country. By comparison, this rate is 30 percent in mature markets like the US and Europe, which means there is still a great deal of room left for the market to grow. Experts predict Chinese luxury automobile sales to reach 2.25 million units in 2016, surpassing the US to become the world's largest. That amount is expected to reach three million units by 2020.

For a luxury automobile manufacturer, producing products directly in China is greatly beneficial. Importantly, being able to provide quality after sales service is something important for any automobile manufacturer in the country; this is much easier when the automobiles themselves and their parts are produced domestically. Furthermore, domestic production is a sign that the manufacturer regards the Chinese market as important, which is something that is very favorably by consumers in the country.

However, given the fact that competition in the automobile market is incredibly fierce, luxury manufacturers can't hope to gain too much in terms of additional profits when manufacturing vehicles domestically as opposed to importing them. Consumers expect domestically manufactured vehicles to be much less expensive than their imported counterparts, due to not having to deal with exorbitant import taxes and other costs. Therefore, manufacturers of domestically manufactured vehicles are expected to pass those saving on to consumers. According to studies, profits for domestically manufactured luxury vehicles are actually slightly less than those for imports.

That said, undertaking domestic production is the only way for luxury manufacturers to keep up with consumer demand and remain competitive in the country.