If there's one thing that China has always desired, from a motoring perspective, it's a long-wheelbase saloon. Car makers actually make specific China-only models of some cars, with extra inches devoted to the rear seat legroom. For a long time, a long saloon has been a Chinese market safe bet.
No longer. China is now on a massive SUV binge, and worryingly for European, Japanese and American car makers, the buyers are buying cheap, locally-produced models, not the more expensive, and ostentatious foreign brands.
According to Bloomberg News, 27 per cent of the new cars registered in China so far this year have been SUVs, almsot double the rate of last year. The race to buy bigger, taller vehicles is being attributed, at least in part, to the growth in road rage incidents, something that is perhaps hardly surprising in a country where vehicle ownership has increased ten-fold in the past decade.
The facts that fuel prices are falling and that China's road network still consists largely of unmade dirt tracks once you get outside the major cities are also being cited as driving the SUV boom, but the road rage thing appears to be more than mere anecdote – a recent YouTube video showed a woman being dragged from a car and kicked in the face during an altercation, and the Chinese security ministry recently issued an edict calling for drivers to act in a 'civilised manner.' "The angry ones are scaring the sane ones into buying SUVs for self defence" Robin Zhu, an analyst for Sanford C. Bernstein told Bloomberg.
The problem, from a European, American and Japanese perspective, is that the sales are going towards locally made SUVs, ones that cost in and around the USD$21,000 mark. That's leaving many of the more prestigious marques out in the cold. Land Rover has been notably affected, causing a precipitous 33 per cent profits drop so far this year that has analysts worried about the health of its parent group, Tata Industries.
Other brands may be about to follow suit – quite apart from the lower purchase price, the buying of cheaply-made local cars is being driven by the Chinese government, which is in the midst of an anti-ostentation drive, encouraging people to become more humble about their newly found wealth, so as not to stoke the fires of discontent amongst the country’s still-huge numbers of poor, working-class citizens.
Jan-Patric Schmitz is a former North American CEO of luxury brand Montblanc, and in a report for the Dilenschneider Group he said that “executives at luxury brand companies attribute slumping sales to President Xi Jinpin’s “tiger and flies” anti-corruption, anti-ostentatious display of wealth campaign, an effort that has discouraged consumers from buying and wearing luxury brands.
Currently, there seems to be widespread consensus among these executives that the slowdown in “conspicuous consumption” is temporary. Such thinking may be naive.
"President Xi's campaign has already gone far deeper and lasted much longer than anyone imagined. It seems likely to continue indefinitely, because corruption is damaging the very legitimacy of the Communist Party. By fighting corruption and the ties between political leaders and members of China's wealthiest citizens, Xi is attempting to quell what could erupt into civil unrest. The fight to prevent that from happening will therefore continue."
