The Chinese automobile market is the largest on the planet. Soon it will also be for luxury cars. But not everything is rosy: Western brands want more openness, the locals fear for the business.

In China, something like 23.9 million passenger cars and light commercials were sold in China in 2016. A record value that makes it unquestionably the largest automotive market in the world. This is decisive, therefore, for both local manufacturers and almost any brand that wants to avenge these days – so not surprising that 57% of sales have been secured by models from foreign manufacturers.

And the reasoning is valid, too (or above all …), for the more luxurious, radical and exotic proposals that once again have their market of choice in China – it is hoped that within two years it will be the most important on the planet as well For this type of proposal. And they come back because, in 2014, sales of this type of automobile went back there like 20%.

All because Xi Jinping, the most powerful Chinese president since Deng Xiaoping in office since 2012, started a crusade in 2014 not only against rampant consumption but also against corruption. That did not slow down, having in 2016 been punished in China, for this crime, 415 thousand public office holders, 23% more than in 2015.

Now, since luxury cars have so often been used as gifts to secure political favors, it is easy to see why sales have fallen. Having to add the creation of the “ultra luxury” tax of 10% for automobiles with a price of more than 175 thousand euros, as a way to promote a more reasonable consumption.

Ferrari has in China one of the markets with the highest growth rate

But gradually, sales in this sector have been growing and in 2016 have already reached values close to those of 2013. With the decline of car-related offers of corruption to be offset by the increase in private consumption. Not surprising when you take into account that the number of Chinese millionaires has increased by no less than 10% in 2016 (it is expected to double to something like 1.7 million people by 2026), and that confidence Of consumers in that country is the highest since the outbreak of the global financial crisis, which of course did not fail to affect the Chinese economy, which hitherto hit consecutive annual growth records.

The strength of numbers

Nothing like the numbers to illustrate the weight that the Chinese market takes on for the operation of the most reputed builders on the planet. In 2016, Maserati, McLaren and Porsche beat their sales records there. Lamborghini’s have risen more than 50% compared to 2013. Bentley has no hands-on measures for its most gifted and, of course, costly models.

Specifically, Aston Martin says that it has already exhausted its DB11 production allocated to the Chinese market this year, where it expects to sell 270 cars, compared to 170 sold in 2016. Ferrari assumes that China is decisive for its operation at Global level. Maserati’s sales rose by 119% year-on-year, prompting the brand to decide to increase the number of points of sale in China by 50% to 75, which it shares with Alfa Romeo, . McLaren set itself the goal of selling 300 cars in China in 2017, after having almost doubled its sales in 2016 to 235 units.

Changing the paradigm

But in China, not everything is roses in this particular. Since its opening to the outside, about 20 years ago, the brands that intend to operate in the country are forced to find a local partner, and can not hold more than 50% of the new company. A measure which, so far, has worked well for the benefit of local manufacturers, especially those held by the State.

According to the Chinese association of the sector, these benefited in 2014, 9 billion euros with these partnerships. With the three largest Chinese state-owned brands (SAIC, Dongfeng and Guangzhou) collecting 7 billion euros of profits in 2016, almost four times more than in 2007.

Some of the Chinese brands will struggle to survive if the government ends the current protectionism of local industry

It is easy to understand, then, that many are keen to abandon (at least to loosen up) this protectionist policy. General Motors, Nissan or Volkswagen, which already have the main destination of their products in China, and whose financial results would certainly improve by several billions of dollars if they could take full or at least majority control of their products. Operations in the country. Also because, there, the margins tend to be higher than those achieved in Europe, the USA or Japan.

Additional pressure in this regard has been made by the new US administration. Already since the election campaign period Donald Trump has expressed his intention to assess the reasons why there is a deficit in almost all trade conducted by the US, with China at the head, where the balance is unfavorable to him by 45% . Trump has even threatened to impose a 45% charge on products imported from China, with rumors suggesting that its Chinese counterpart has shown signs of being willing to abdicate from such protectionism at the meeting that brought them together earlier this month, in Florida.

Indeed, in China this discussion lasts at least since 2013. In the corridors of power, those who advocate further liberalization support their argument on the need for local manufacturers to be forced to innovate and increase quality Of their products in all domains. Another of the defenders of the measure, and subscribing to the argument, is Geely, owner of Volvo, and has just shown in the Shanghai Hall the first model of newly created Link & Co., brand decidedly bet on innovation at various levels.

The future is here

But there is also the other side of the matter, because if the foreign manufacturers take over their operations in the territory, surely the locations will suffer a severe setback. Take the example of SAIC, the largest company in the sector, and a partner of General Motors and Volkswagen: of the 5.67 million passenger cars sold in 2016, only 6% were Chinese, namely Roewe and MG. Guessing that the situation in Dongfeng and Duangzhou is not much different.

And this is largely because most Chinese car brands are still at an embryonic stage of their existence. Virtually unknown outside the country, even in “home” occupy the lower segments of the market, lacking a strong development in terms of image, and products with another level of quality, in the most varied chapters.

That is why there are also those who defend the maintenance of the current state of affairs. Claiming that, with a hypothetical liberalization, almost all Chinese manufacturers will be doomed to extinction, unable to compete with their foreign counterparts and their more evolved and appealing products.

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As in everything, there are those who are like that “half way” between the two options. This is curiously the case for the German premium brands: all of them claim to be satisfied with the partnerships they have established, although not by embracing, rather than willingly accepting, another freedom to take a greater share in the societies they have established.

It is certain that in one way or another, China will pass the future of the automotive industry as we know it today. And even over a longer time horizon, considering that it is at that time that the most stringent measures in the field of electric propulsion are in force, which could make China one of the main, if not the main, pole of development of the one that is held As the mobility of the future.

 

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