FAW VW: Middle class to be the growth driver for China’s luxury vehicle market

From the perspective of carmakers, the “New Normal” includes increasingly intensified competition and slower growth. But for the year of 2016, the Chinese car market signals growth.

SimingRen, General Manager for sales at FAW VW, said during his interview with China Business News that he is still very confident with China’s auto market, despite the fact of shrinking margin and weakening profitability of both carmakers and dealers, because “the growth of Chinese market did slow down, but still equal 3 to 4 times than the European market” and the rising middle class in China, in particular, will be the growth driver for China’s luxury vehicle market.

The Rising Middle Class

Ren believed Chinese auto market, especially the luxury car segment, will remain on the increase, driven by the 6%-7% economy growth, and more prominently, the rising and expanding middle class in China. Forecast says “the middle class population will reach 80 million by the year of 2020, from the current 70 million.”

To be noted, the emerging middle class in China are partly very young with excellent taste and unique lifestyle. For them, fancy car is not something for showing off. Ren believed “Audi will attract these buyers with our powerful brand, model style and design, and in this way, defend our market share.”

New Consumption Pattern

For the time being, China’s car consumption pattern is undergoing tremendous and profound changes, including car-sharing and auto financing. Buyers, especially young buyers, want to voice their very own styles.

Ren said, Chinese market features a high-speed dynamic development, we must closely observe the changes in consumer’s consumption patterns. “Once notice a trend, we will take actionpromptly.”

Ren believed the sharing economy is taking shape in China. But from the perspective of convenience, the development of car-sharing may still need more time.

Meanwhile, the development of auto financing in China, especially the financial leasing, has been very good. The percentage of consumer credit for entrance-level luxury cars has reached 70%. Under this background, some dealers with swift response have already implemented related service.

According to Ren’s analysis, with the increasingly improved production, the competition in Chinese auto market in 2016 will be further intensified, leading to a wilder price fluctuation of cars, "which is quite normal in mature markets and nothing to be scared of".