When Zheng Huizhong was growing up in the Henan countryside, he was proud his father owned a three-wheeled farm tractor. Back in the 1970s, that was as automated — and fast — as most people could get in rural China.
Today, however, he is out shopping on Beijing’s swanky Jinbao (Treasure) Street for an addition to his Bentley and cannot quite decide which 300kph sports car to splash out on.
“I like Aston Martins because I used to watch James Bond films. But I think I prefer Ferrari, even though they are more expensive,” muses the former farm boy, who has made a fortune as a yacht salesman.
Photo: EPA
Each of these cars cost more than 4 million yuan (US$620,000), but price is not Zheng’s main concern.
“Turning heads with a luxury car is not as easy as it used to be. They are common now. Many people can afford them,” he says. “So I focus on comfort.”
It is an increasingly familiar story as ranks of wealthy Chinese move from bike to Bentley and moped to Merc in a generation. This has not only transformed the streets of Beijing, it is reshaping the business strategies of the world’s biggest carmakers.
Photo: Bloomberg
China’s emergence as a car industry superconsumer is evident in Jinbao Street. This leafy promenade between the Forbidden City and the central business district opened in 2002 on the site of demolished hutong (alleyway) neighborhoods. It aims to be Ginza — Tokyo’s shopping and entertainment district — plus Mayfair and Park Avenue all rolled into one, with five-star hotels, plush restaurants and designer boutiques. However, its most striking feature is a clutch of car showrooms. One side of the street is home to Ferrari, Rolls-Royce, Maserati, Jaguar and BMW. On the other, Lamborghini, Aston Martin and Mercedes.
Most of these luxury brands have only moved in within the past few years, but the chief outlets on this street — and others like it in Shanghai, Tianjin and Guangzhou — have rapidly become the leading profit centers for the world’s prestige carmakers.
Sales of ultra-luxury vehicles in China have increased by 30 percent in the past six months, after even more spectacular growth last year. Thanks largely to this surge, Mercedes — one of the first foreign firms into the market — recently announced the highest monthly worldwide car sales in the company’s 110-year history. BMW has also just attributed its best ever six-monthly sales to high demand in China.
Audi — another early arrival — sold more than 200,000 cars in China last year, nearly overtaking Germany as its biggest market. Its vehicles are now the must-have status symbol for communist cadres and government officers. According to the finance ministry, the government spent 86 billion yuan last year on official cars. Audi have tried to cement their hold on this lucrative niche by customizing models with temperature-controlled holders for the tea-flasks carried around by officials.
Cars have become one of the most visible symbols of an increasingly divided society.
Between 2000 and last year, the number of cars in China increased 20-fold to an estimated 270 million cars and motorbikes. In the next twenty years, this is forecast to more than double again, which means there will be more cars in China in 2030 than there were in the entire world in 2000. But the pace of growth is as uneven as the society.
In the past six months, the rise of overall car sales has slowed to single digits from the spectacular 20 percent to 30 percent expansion of the past decade due to rising fuel prices, curbs on license registrations in Beijing and government efforts to promote public transport. However, the rich are not only getting richer, they are getting rich faster.
The Aston Martin Rapide — which Zheng is considering — has a six-liter engine, a top speed of 303kph and a price tag of 4 million yuan. This is almost twice as expensive as in the west due to high import tariffs. According to the Hurun Rich List, China has almost a million dollar-millionaires, each of whom owns an average of three cars.
Luxury car ownership has distinct Chinese characteristics. On average, Chinese owners are 10 years younger than their counterparts in the US and Europe. They are also more likely to be women. Fiat estimates the percentage of women buying its Maserati models in China is triple that of Europe, while the percentage buying its Ferraris is double the global average.
Regardless of the jams, China’s nouveaux riches increasingly flaunt their wealth on the roads, much to the envy of others. Among the most widely circulated photographs on the Internet in recent years are those of the ostentatious wedding parades for the daughters of Shanxi coal barons. One reportedly featured four Rolls-Royce Phantoms, four Ferraris, six Mercedes Benz, six Bentleys, 20 Audi Quattros, six Jeeps, a Hummer, plus several BMWs, Porsches and Range Rovers.
Foreign companies are cashing in on the growing obsession with status. Last year, Lamborghini sales tripled in China to 247 cars, Rolls-Royce’s rose 146 percent to 678 cars — overtaking the UK and on course to soon surpass the US.
“It will only be a matter of time before the market becomes the largest market in the world for the company,” Jenny Zheng (鄭津蘭), general manager of Rolls-Royce’s regional office, told China Daily.
Bentley’s sales almost doubled to nearly 1,000 cars, making it the firm’s third-biggest market. Porsche — which has been in China for 10 years — sold 13,800 cars, up 60 percent from 2009. In recognition of where growth is coming from, Volkswagen, which encompasses the Audi, Bentley and Bugatti marques, plans to invest an extra $15 billion in a joint venture by 2015.
Rising concern about the impact on traffic, the environment and fuel prices has prompted the government to promote energy-efficient vehicles and public transport. Beijing has sharply restricted issuance of new vehicle registrations, handed out rebates to millions of buyers of fuel-efficient cars and is doubling the length of its subway system with a 330 billion yuan investment. High-speed rail networks are being rolled out nationwide, most recently from the capital to Shanghai.
Analysts see little indication that the passion for big, fast engines will dampen any time soon.
“The appeal of the car is rising because in China, it has become the symbol of fortune and social class,” Beijing Institute of Technology economics professor Hu Xingdou (胡星斗) said.
However, China’s traffic looks likely to slow of its own accord. Despite the surge in sales of 300kph cars, the rush-hour speed in Beijing is rarely above 25kph. Nor can the comfort of plush interiors fully compensate for the inconvenience of nightmarish congestion. According to a survey by IBM last year, seven out of 10 drivers in Beijing have at least once given up on getting to their destination and turned back because the jams were so bad. In a “commuter pain index” of 20 global cities, the world’s most painful commute is into the Chinese capital.
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