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A Closely-Fought Battle of Rankings in the Luxury Car Market in the First Half of the Year

Date:07-21 10:58 Authour:Zhu Shiyun

Judging from the overall ranking in the first half of the year, in the first camp, the battle of rankings among the three best-selling German brands was mainly a fight between BMW and Mercedes. In the second camp,Jaguar Land Rover, Lexus, Cadillac and Volvo have secured their positions, but specific rankings are quite volatile. As for Infiniti and DS, what used to be active luxury brands are now running the risk of becoming marginalized, and what does the future hold for them?


A Closely-Fought Battle of Rankings in the Luxury Car Market in the First Half of the Year

In the luxury car market, the competition is all about long-term strategies, patience, dedication to products and services, and innovation.

In the luxury car market in China the camps may remain unchanged, but within each camp the internal struggle is becoming increasingly fierce. Last May, Mercedes surpassed BMW to become No.2 among luxury cars by a tiny margin. According to data released recently by a third party, the sales of Beijing Benz exceeded Brilliance BMW in the first half of this year. Shortly afterwards, BMW officially announced that 153,701 domestic BMWs had been sold in the first six months of this year. Based on this, BMW still remains in second place in the luxury car market, but it is an unquestioned fact that Mercedes is catching up.

In the first camp, the battle of rankings among the three best-selling German brands was mainly a fight between BMW and Mercedes, while in the second camp rankings changed frequently - Jaguar Land Rover, Lexus and Cadillac jockeyed for fourth and fifth place, and Volvo competed with them for sixth and seventh place. Judging from the overall ranking in the first half of the year, Jaguar Land Rover, Lexus, Cadillac and Volvo have secured their positions in the second camp, but specific rankings are quite volatile.

As for Infiniti and DS, what used to be active luxury brands are now either surrounded by negative news or have fallen out of the public view and are running the risk of becoming marginalized. In this new environment where market growth is slowing down, what does the future hold for them?

Competition for the second and third places is a battle of stability

“Currently, the most important thing for BMW is stability,” said an industry veteran to China Auto.

The three leading German brands have secured their positions in the first camp. Looking at the cumulative sales of these brands in China in the first half of this year, third place Mercedes had sales of 215,000 vehicles (excluding the SMART), way beyond that of Jaguar Land Rover, which sold 54,000 vehicles. However, within the first camp, the situation was no longer steady. In the first half of the year, a total of 289,000 Audis were sold, keeping this brand sitting comfortably in first place. Unfortunately for BMW, after being No.2 in China's luxury car market for almost a decade, they were surpassed by Mercedes by a tiny margin in May. The good news is that BMW was back in second place in June, with year-to-date sales of 233,000 vehicles (excluding the MINI), which surpassed Mercedes by nearly 20,000 vehicles.  

Nevertheless, BMW cannot rest on its laurels. The gap between these two leading brands lies mainly in imported cars. In the domestic segment, a total of 153,000 BMWs were sold, ahead of Mercedes’ sales of 148,000 vehicles by a margin of only 5,000 vehicles. Judging from the trend, the year-to-date sales of domestic BMWs in the first half of the year saw year-on-year growth of 8%, while domestic Mercedes saw growth of up to 50%. “Mercedes seems unstoppable now,” the industry veteran continued.

It is a common view in the industry that this is a big year for Mercedes. Judged by its share of the domestic vehicle market, Mercedes’ 69% is not much higher than BMW’s 66%, but in terms of vehicle models, the sales of Mercedes’ SUVs GLK and GLA represent almost 50% of domestic models. What is more, Mercedes will launch models like the New Generation E Class, SLC, new SUV model GLC and modified model GLA, most of which are major vehicle models. Currently, the best-selling models for BMW are still the middle- and late-staged 3 and 5 Series, whose sales account for more than 80% of the total sales of domestic models. However, in the new products, with the 2 series still in the growth stage, X1 seems to be the only hot seller, but its 11% sales contribution is still not enough for BMW to compete in the SUV market. Now BMW is pinning its hopes on the next generation X3 and BMW 1 Series Sedan, which will be launched in the second half of the year.

The industry veteran indicated to China Auto that after last year’s adjustment, BMW seemed to have stabilized its vendor relationships, and that currently the most important thing for BMW was to maintain stability in the market so that it would not have to compete with Mercedes for second place. “Losing second place will be quite unacceptable to both BMW’s global head and its China chief, but if we overstock products just to maintain the ranking, it will only be a temporary solution, followed by a greater loss. What BMW needs to do is choose the lesser of two evils.”

Competition for the fourth and fifth place is a battle of capabilities

Compared with the simple and crude competition of products and the relative stability in the first camp, things in the second camp are much more complicated and delicate.

Judging from the year-to-date sales, Jaguar Land Rover, Lexus, Cadillac and Volvo rank fourth, fifth, sixth and seventh in China’s luxury car market, constituting the second camp, with respective sales of 54,000, 46,000, 45,800 and 40,000 vehicles. However, frequent changes have been taking place in the monthly ranking. Jaguar Land Rover gave way respectively to Lexus and Cadillac in April and June, and Volvo climbed to the sixth place in February and June.

After the domestic Range Rover Evoque’s “nightmare” of sharply falling sales last year, Jaguar Land Rover managed to get back on the rising trend by launching the lower-priced domestic Discovery Sport and reducing the Evoque’s price. As a result, in the first half of this year, Jaguar Land Rover achieved a year-on-year sales increase of 19%, and 48% of sales came from domestic models. The industry veteran indicated that sales growth of Jaguar Land Rover was mainly attributed to the reasonable pricing of domestic models. “Things would have been a lot better if they had priced those models like this from the beginning.”

As for Lexus and Cadillac, under the stimulation of new products, how much they can do to improve their channel inventory management and product quality has become one of the core driving forces in their competition for fourth place.  

As an import brand, Lexus should attribute its good sales results in China not only to the three best-sellers – ES, NX and RX, but also to the profit guarantee for car dealers brought by its less-than-a-month dealer inventory. Jiang Jizhe, Executive Vice GM of Lexus China, once told China Auto, “Among all the auto makers in China, I am the only senior executive who considers dealers’ profits as my own KPI.”

For Cadillac, ATS-L, XTS and XT5 are the biggest sellers. An important reason for this is that Cadillac has reinforced the refinement and quality of these models to bring American-style luxury closer to the Chinese customer’s demands.

In the second camp, the one facing the greatest challenges is Volvo. For various reasons including inadequate marketing and unreasonable pricing, the XC90 did not become the hot seller it was expected to be at launch. The S60L and XC60 still contribute 76% of sales. The industry veteran indicated that the launch of the XC90 would have a decisive effect on the future of Volvo, but given that the brand is not strong enough, there is still much uncertainty as to the future of the XC90.

New niches are being sought in the third camp

In the third camp, there are many brands that used to be active. Now in this period of adjustment and stability, they are all looking for a new niche.

With the help of previous marketing campaigns and thanks to the competitiveness of two new domestic models, Infiniti soared into the second camp for a while in 2014 to 2015. In the first half of this year, 18,000 cars were sold in China, basically the same as last year. What has drawn more public attention than sales was the departure of the senior management team, and the product recall. Lu Yi, who has been in office for three months as the new President of Dongfeng Infiniti and Managing Director for Infiniti's China operation, indicated that the current priority was stability – “We should keep daily operations, team building and the dealer system stabilized” - and at the same time look for tactical breakthroughs: “We can’t change our marketing strategies just for a short-term sales increase. Infiniti is committed to setting an example with breakthroughs in some models and regional breakthroughs… it will then pursue more farsighted development”.

Lincoln, which re-entered the China market in 2014, is still in the rapid growth stage. In the first half of the year, Lincoln had year-to-date sales of up to 12,000 vehicles in China, a year-on-year increase of 200%. The industry veteran said that currently Lincoln’s sales rely mainly on its brand power and that its products were still not in the best of shape. Regarding localization: “For now, dealers can make profits through brand power, and localization can wait until products come out that fit with the Chinese market’s aesthetic demands and mindset.”

DS, which has been produced in China for over three years, is still in search of the right path. According to data obtained by China Auto, a total of over 8,700 domestic DS cars were sold, down by 19% on a year-on-year basis. It is said in the industry that the DS is beautiful, but no one is buying. Regarding this, the industry veteran said, “DS is now in the post-Chen-Guozhang period, paying the price of the unrealistic marketing strategy proposed by Chen last year.” Chen Guozhang, former President of DS Chinese Peugeot and Southeast Asia, proposed the “43210 strategy” after taking office, in the hope of increasing last year’s sales to 50,000 vehicles and achieving breakeven. However, as a brand newly entering the market, this move was apparently too aggressive. The industry veteran said that the main task for DS in the future was to enhance its brand image and handle relations with dealers properly, so as to let the public know about the real strengths of its products.

Acura, which is about to launch its first domestic product, is facing great pressure. In the first half of the year, Acura sold 1,199 vehicles in China. For a luxury brand that has been in China for a decade, this number really shows that it is being marginalized. Now the first domestic product manufactured by the joint venture between Acura and GAC – the CDX - is already off the production line, and will be launched this July. It remains to be seen in the market whether this go-young strategy can work.  

Data shows that in the first half of the year, the total sales in China were 1,283 vehicles, an increase of 8.1% on a year-on-year basis. However, the dealers’ inventory alert index also reached 60% in June. For luxury cars, it is common that dealers cannot maintain new car prices. The industry veteran indicated that now that the luxury car market has shifted from the movement of enclosure to the era of intensive marketing, the competition is all about long-term strategies, patience, dedication to products and services, and innovation.     


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