Country's SUV sales to set global pace soon

China Daily, June 24, 2011

BEIJING - China overtook the United States as the world's largest car market on sales of sedans. Future growth lies with sport utility vehicles (SUVs).

SUV deliveries rose 30 percent this year through May, compared with a 6 percent gain for total passenger car sales, according to the China Association of Automobile Manufacturers.

Sales of SUVs in the world's second-largest economy will increase 33 percent in the two years through 2012, almost twice the pace in the US and four times that of Western Europe, according to Lexington, Massachusetts-based IHS Automotive, an industry consultant. Porsche SE already sells more Cayennes in China than anywhere else in the world.

"It's the next great wave of consumer demand in China," said Bill Russo, Beijing-based senior adviser at consulting company Booz & Co. "First-time buyers buy sedans, second-time buyers look for more variety."

Chinese consumers will buy 4.3 million SUVs by 2018, or 86 percent of projected US sales, up from 47 percent last year, according to Westlake Village, California-based JD Power & Associates. SUVs accounted for 9.7 percent of China's total passenger car sales last year, from 4.4 percent in 2006, data from the nation's automakers group show.

"Historically, China is a sedan market because it is socially accepted and practical," said Klaus Paur, Shanghai-based managing director for Greater China at Synovate Motoresearch, an industry consultant. SUVs are "extremely attractive to those who are affluent and want to demonstrate they are successful, modern and dynamic."

China's economy will expand 9.6 percent in 2011 and 9.5 percent next year, the fastest rate among major emerging markets, according to International Monetary Fund projections. Private wealth has grown with the economy, with the number of Chinese millionaire households jumping 31 percent to 1.11 million in 2010, according to the Boston Consulting Group.

Profit margins for SUVs are typically wider than sedans as automakers can charge higher prices for additional features, according to Russo.

For Jane Zhao, 38, trading her Volkswagen Jetta for a Jeep Compass has made all the difference in Beijing, the city voted by motorists in an International Business Machines Corp survey last year as having the most "onerous" commute.

"It adds a bit of fun," said Zhao, works for a consulting firm in Beijing and spends three hours a day on the road. "Driving it gives me a better view, which is very important when stuck in endless traffic jams or trapped by vehicles, cyclists and pedestrians on smaller roads".

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