Stephan Winkelmann, president and CEO of Lamborghini, watches the unveiling of the Lamborghini LP 700-4 Aventador .Eugene Hoshiko
I just returned from a week in China. What a revelation.
I was there to get some idea of the breadth and depths of the auto industry in what has become the world's largest automotive market. (BTW: Daimler AG recently said he expects the new vehicle market in China to reach 30 million units, which would be almost twice the size of the very best sales year in the former world's No. 1 market, the United States.)
During my trip I spent time in Beijing and then headed to the northeast city of Changchun, which is China's auto manufacturing hub. In Beijing I visited car dealerships, including a bustling Audi store run by a woman who did her master's degree in Montreal.
This Audi dealer moved some 3,000 new cars last year and plans to do 3,500 this year. Eventually, annually sales of 10,000 are not out of the question, I heard.
What does a profitable Audi dealer in Canada sell? Say, 800 new cars a year. Audi plans to more than double the number of dealers in China from about 175 today to 400 in the next couple of years. Now that's growth.
The sales mix in China is also a massive piece of the story. Luxury brands such as Rolls-Royce, Bentley, Ferrari, Lamborghini and Maybach are all doing a booming business there.
So is Aston Martin, whose One-77 specialty model is prized: five cars are destined for China out of a 77 for the world. All of the five were sold before the official opening of the Shanghai auto show last month. Price: 47 million yuan or about $7.2-million.
This will come as no surprise to many, but rich Chinese are snapping up luxury cars at an astounding rate. HIS Automotive, a market research firm based in the United States, says 727,227 high-end cars were in use in China last year. The figure is expected to reach 909,946 this year, and 1.6 million in 2015.
Media reports showed that more than 1,000 Ferraris are driven in China, which is expected to become Ferrari's second largest market. Meanwhile, last year Aston Martin sold more than 120 cars in China.
Here's one big, big reason why luxury auto makers love China so much. According to the consulting firm, McKinsey & Company, about 25 per cent of luxury goods consumers are willing to buy without any discount at all. Companies such as Audi and Aston Martin, then, are selling their priciest models at full pop.
No-dicker luxury car sales are almost unheard of in Canada and the rest of the mature automotive world. Not China.
No wonder the big German premium brands are pulling the bulk of their profits out of China these days.