The huge Chinese car market has been seen as a sales salvation for Western car makers; the automotive equivalent of shooting fish in a barrel. But it looks like that’s all changing, particularly at the luxury end of the market.
Bloomberg are reporting that until recently luxury car makers were enjoying margins of up to 18 per cent on their cars, with many dealers asking for – and getting – big premiums for early deliveries of luxury cars. As recently as last year it would cost a wealthy Chinese buyer an extra £20k to get quick delivery on a Mercedes S600.
But as supply has started to exceed demand there’s been a big turnaround. Far from getting premiums on luxury cars, car makers are now having to offer bug discounts and incentives to get buyers to part with their cash.
Mercedes are apparently offering discounts of 25 per cent on the S300, with Audi and BMW offering discounts of 20 per cent on the A8 and 7 Series. In addition, car maker are also throwing in incentives like discounted Chanel, Luis Vuitton and Hermes bags with free iPhones, free insurance and free servicing thrown in to the mix.
It looks like the party may be over for luxury car makers in China, with a more mature marketplace now offering the same challenges as in the West.