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Wednesday, March 21, 2012

The Chinese Luxury Car Bubble Bursts


Mercedes-Benz is but the latest in a line of automakers who have resorted to seriously discounting their vehicles for sale in mainland China, now by as much as 25% off. That's better than WalMart cheap people, we're talking outlet mall deals here. BMW and Audi have respectively discounted their flagship 7-series and A8 models by 20%, but market experts believe this may only be the beginning of such price cutting moves. Most of the German brands have already been discounting entry-level models for months before including the top-shelf cars more recently. The decline in interest in luxury vehicles is presumed to be caused by both a leveling off of economic growth in China as well as simple mathematics, everyone who could afford the pricey vehicles now already have them so the market is simply drying up. We always pondered the oddly dismissive remarks made by the Teutonic executives who almost couldn't contain their readiness to bow down before their Chinese overlords, or more appropriately, their presumed infinite stockpiles of Yuan. Consider the fateful statement from April of last year by Klaus Maier, President and CEO of Mercedes-Benz (China) Ltd. "We need to make a heavy effort here, make China our top focus, since it will become Mercedes' largest market." Ooops.

Sales forecasts in Europe is not quite as dismal for 2012, albeit shrinking as compared to previous years, contrasting this with US projections that show an increase in interest and sales of luxury vehicles from Mercedes-Benz, Audi, BMW and Lexus due to a strengthening economic outlook and the return to work for many individuals who were holding off on new car purchases until their financial situations were better resolved. It seems drunk Midwesterners may have said it best, "USA! USA! USA!"

We can't help but wonder if any of this could have something to do with the depletion of perceived brand "cache" for foreign luxo-barges considering China has shown zero interest in cracking down on so-close-as-to-basically-be-counterfeit cars such as those shown below, all Chinese knockoffs with no relation to their more famous/safe originals. Kinda gross eh?

Anyone in the market for an "Ex Five"
How 'bout a "See Class"
A "Not So Smart Car"
Looks like a "Rose-Royce" to us

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