Luxury cars may buck decline in Chinese auto sales

Rise in upper-class population, high consumer confidence, and moderate inflation will spur high-ticket car purchases.

Premium car brands may continue to see robust demand despite weakening passenger car sales in China amidst the rapid growth of deep-pocketed individuals with cash to burn, according to Fitch Solutions.

The number of Chinese households earning US$75,000 and above will increase to 1.96 million in 2019 from 1.59 million in 2018.

The report cited the elevated Consumer Confidence Index which increased to 124.73 points from January to July 2019 from an average of 111.97 points from 2015 to 2018, suggesting strong appetite for consumption. Moreover, consumer price inflation remains moderate at 2.7% in 2019 and 2020 from 2.1% in 2018.

The sales of top 10 premium car brands already increased 10.0% in 2018, whilst passenger cars saw a drop in sales by 4.2% over the same period. The share of top ten premium car brands in overall passenger vehicle car sales also rose to an estimated 11.6% in 2018 from 8.8% in 2015.

Link: Chinese passenger car sales may crash to 250,000 units by end-2019

However, Fitch added that trade tensions between the US and China will impact car producers and Chinese consumers, but manufacturers with a local production base are tipped to fare better than those who depend on vehicle and car part imports from the US.

As this tension will weigh more on lower- and middle-class consumers rather than of the upper-class, demand for premium cars is expected to stablilise especially since premium car brands continue to invest heavily in local production to mitigate the impact of import tariffs.