BEIJING (May 10, 3 p.m. ET) — When Automobili Lamborghini SpA unveiled its newest supercar concept — a carbon fiber sports utility vehicle study — it didn't take it to Paris or Los Angeles or Tokyo or Detroit.
“It's time to have a real world premiere here at China Auto in Beijing,” said Stephan Winkelmann, president and CEO of the Italian sports car company as he unveiled the Urus in Beijing on April 23.
And Lamborghini was not the only luxury carmaker debuting new concept and production cars during the annual show. While the emphasis on China's growth as an auto market has focused on volume, it has also steadily become a showplace for high-end vehicles as a rising middle income and wealthy consumer base put their money on top name brands.
“It is projected that by the end of the decade, half of all luxury purchases in the world — all categories, not just cars — will occur in China,” said Don Butler, vice president of marketing for General Motors Co.'s Cadillac brand.
China already is the second-largest market for Cadillac, where GM is bringing new production this year. BMW AG only sells more cars in its home base of Germany than it does in China.
“The first car people buy is for transportation,” said Klaus Paur, global head of automotive for forecasting company IPSOS. “The second is for brand name.”
And that desire for internationally known brands is driving more opportunities for Korean, Japanese, European and North American cars both imported and produced in China, as well as suppliers who can produce the same quality parts in China as elsewhere in the world.
Global parts makers such as Magna International Corp., SRG Global Inc., International Automotive Components and Faurecia SA have expanded production to keep up with increased demand during the past few years, while Chinese firms have pushed to improve their capabilities.
“When we first started, we were doing localization,” said Todd Fortner, president of CAIP Group, based near Shanghai in Changshu. “The big challenge was moving in the last eight to nine years to create the [ability] to make world-class automotive interiors for BMW or Audi.”
CAIP is building a new plant near Beijing to supply Mercedes. Through joint ventures with key global firms, it makes interior trim and exterior trim including bumper fascia. The company is the second-largest producer of door panels in China, Fortner said. Its capabilities cover multishot molding, overmolding and complete cockpit assemblies.
Domestic Chinese automakers dominate the market for lower priced vehicles selling for less than 100,000 RMB ($15,800), Paur said, although some small international brands are now available in that price range. Those name plates' presence is increasing the pressure on domestic companies to improve their qualities, including better fitting and finished injection molded interior trim.
Above that price level, the international firms dominate, taking up as much floor space for their displays at China Auto 2012 as Chinese firms. The featured vehicles rotating on turntables at the expo center in Beijing bore the same name badges as those at any other auto show.
Honda Motor Co. Ltd.'s showed off a concept for the next version of its Accura NSX sports car — the same concept first introduced four months earlier at the North American International Auto Show in Detroit. Honda will introduce the final production version of the NSX in China at the same time as the United States.
“We believe our unit sales in China will rival the U.S. sales soon,” said Honda CEO Takanobu Ito.
Sales are doing more than merely rival the U.S. for some carmakers. China is now the top market for super luxury brand Bentley Motors Ltd., although — like Lamborghini — its target market is a very limited number. If Lamborghini makes the Urus, which would use its proprietary carbon fiber production method for its structure and feature carbon fiber in its interior, Winkelmann said it would set annual production at just 3,000 vehicles.
China already has enough wealthy buyers on hand to support that ultra luxury.
While the average annual income in China is less than $4,000, that average covers a wide range of individual salaries. Income is closer to $15,000 in key cities like Shanghai, Beijing and Hong Kong, but only $1,100 in the rural area.
The high end of the scale is expanding, though.
China has the fourth-largest population of “high net worth individuals” — people with assets greater than $1 million — globally, according to Bank of America Corp.'s Merrill Lynch Global Wealth Management and consulting group Capgemini's 2011 Asia-Pacific Wealth Report. There are an estimated 535,000 millionaires in China. Hong Kong alone is home to more than 101,000 millionaires.
In response to that growing demand from new buyers with cash on hand, the auto industry is trying to identify the style and vehicle cues the Chinese consumer wants.
Because most sedans sold in China are used for multiple-person transportation, Germany's BMW is building China-specific versions of its sedans with a longer wheelbase, providing an additional 3 inches of leg room for rear seat passengers.
Nissan Motor Co. Ltd.'s Infiniti brand recently moved its global headquarters to Hong Kong to help it tap into growth, while Detroit-based GM will begin making the XTS luxury sedan in China this year, just a few months after production launches in North America.
“We look at this market over the long term,” said Dan Akerson, GM's chairman and CEO. “It's high growth, high price and high reward and requires a lot of on-the-ground work.”
