Fears grow for European luxury carmakers as sales in China slide

Luxury German carmakers have seen profits tumble for the second consecutive year in 2018, as sales in China took a hit. Unprecedented growth has allowed the established manufacturers to outperform much smaller European rivals…

Fears grow for European luxury carmakers as sales in China slide

Luxury German carmakers have seen profits tumble for the second consecutive year in 2018, as sales in China took a hit.

Unprecedented growth has allowed the established manufacturers to outperform much smaller European rivals – but fear for the future looms large.

The continent’s big four manufacturers – BMW, Mercedes, Porsche and Audi – have seen global sales of luxury cars rise 7% last year to 2.9 million vehicles, but have been losing market share in China.

BMW Group says its China business, the world’s biggest, is weakening, and European sources said it has gone so far as to cut 1,200 jobs in its home market.

Source: BMW Group

The Chinese car market was down 2.9% in the last quarter of 2018, partly down to lingering effects of the trade dispute between Beijing and Washington – but also because of growing popular demand for SUVs.

BMW and Volkswagen, the VW Group’s premium division, say SUV demand was particularly strong in China, and Audi announced plans to expand production capacity in the country.

However, both European companies have lost market share as sales have tumbled.

Volkswagen, while the world’s largest premium carmaker, saw sales of the top-selling Audi, VW and Seat brands drop 1.6%, 4.5% and 3.7% respectively in China, compared with the same period in 2017.

Audi dropped more than 4% in sales in the first nine months of 2018, compared with the same period in 2017.

BMW, which produces three of the world’s largest luxury car brands, lost 0.6 percentage points of market share, despite its own brand showing a 5.6% sales rise in China.

The fall puts China now second only to the US as Europe’s largest luxury car market.

Nissan / Renault, Toyota, Mercedes-Benz, Volvo and Fiat Chrysler all saw slight sales falls in China, but the companies have far fewer direct operations there than the luxury automakers, so that does not significantly impact their figures.

Valeo, the Italy-based luxury company behind Bentley, Rolls-Royce and Maserati, said its global sales rose 4.5% in 2018, though Europe – though still a growing market – was seeing growth slow.

A Volkswagen dealer in Shanghai, Kao Wuding, says the slowdown in China has taken the major European companies by surprise.

“For us, the whole big company, the biggest company in China, they are selling (fewer) cars than they did last year – but nobody expects that.

“They say that, sure there’s a trade war but if it is open, there is big potential in China, it’s a very good market,” he says.

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