The world’s auto makers appear ready to declare that luxury is back in China, with General Motors Co. and Toyota Motors Corp. both unveiling top-of-the-line models at the Guangzhou auto show that opened Monday.
China’s car market defied the world-wide economic slump and has grown 38% in the year through October, helped by stimulus measures to boost small-car sales. But demand in the country’s once-strong luxury car segment struggled, in part because of slower growth in China’s coastal regions, which are heavily dependent on exports that were badly hit by the slowdown.
Now, global auto makers are seeing the old vigor returning, albeit gradually, to China’s premium market thanks to the economic recovery.
GM’s Cadillac brand and Toyota’s Lexus chose this year’s Guangzhou auto show for a world premier of one key model each. The Lexus GX460 is the latest version of the brand’s GX series sport-utility vehicle. Toyota says the redesigned SUV offers “a unique combination of off-road performance and driving comfort.” In short, it is a rugged luxury SUV. Toyota plans to launch the vehicle in China and globally in January.
Cadillac, meantime, has stretched the China-market version of its STS sedan to give backseat passengers more room—a key concern in China, where many wealthy owners have chauffeurs. The new model, called the SLS, also is the first GM car in China to offer OnStar navigation and roadside assistance service.
An array of other brands, from Nissan Motor Co.’s Infiniti to Daimler AG’s Mercedes-Benz, said they are also adding more models to their increasingly fuller product lines for China.
Demand for luxury goods and cars “will come back,” GM China President Kevin Wale said in an interview, after helping unveil the redesigned SLS, a top-end car aimed squarely at China’s market.
“The economy is strong here, and along with that goes more income generation, and more luxury auto sales,” he said. When momentum returns, “it’s going to be very extensive growth.”
Mr. Wale said GM believes that overall sales of luxury cars in China will likely start growing at double the pace of the overall car market. He didn’t elaborate, but noted that he is looking for Cadillac sales to recover next year.
The expected recovery follows a 7% decline in Cadillac sales so far this year, through October, to 5,181 vehicles.
Mr. Wale said sales declined this year in part because GM was slow to respond to last year’s move by the Chinese government to encourage consumers to buy smaller cars through tax increases for vehicles with engines bigger than three liters.
Most analysts echo GM’s forecast. Yale Zhang, a senior Shanghai-based analyst with U.S. consulting firm CSM Worldwide, said he expects China’s premium-car segment to grow 26% to 315,000 vehicles next year. By comparison, sales this year are likely to grow only about 6% to 250,000 vehicles, he said.
Helped by China’s overall economic recovery, especially in exports, and improving consumer access to car loans, luxury-car sales “will likely rebound strongly next year,” Mr. Zhang said.
Like Cadillac, Toyota’s Lexus brand struggled to cope with the tax-policy change. In September, it added the Lexus ES240, a China-only model with a sub-three-liter engine that qualified for a lower tax bracket.
One mistake Toyota made with developing Lexus in China is that the company sold exactly the same Lexus models it sells in the U.S., said Shoju Nozaki, a senior Toyota and Lexus sales manager, who spoke to reporters on the sidelines of the auto show.
“We should’ve corrected that sooner,” he said. The ES240 and the GX460, which fill the gap in Lexus’s SUV lineup, “reflect the importance Toyota attaches to China’s auto market.” though the GX460 will also be sold in other countries.
Meanwhile, Nissan’s Infiniti unit unveiled at the Guangzhou show the GConvertible, a new model for China due to hit dealer showrooms here early next year.
Mercedes-Benz, which unlike Lexus and Cadillac has done well in China’s slow luxury car market, also launched several new models. With new products, China has become the brand’s fourth-largest market, compared with 10th in 2006, said Klaus Maier, head of Mercedes-Benz China. He said he expects China to displace the U.K. as the brand’s third-biggest market next year.
