Luxury cars still sell in Beijing

If China’s financial woes spell doom for Germany’s carmakers, somebody forgot to tell Daimler.

Its Mercedes-Benz brand recorded a 31% jump in China sales in December, according to figures released last week, bringing the 2015 China increase to 33%.

Chinese buyers have snapped up 500 high-end Mercedes Maybachs every month since the model launched in the country in the February.

Yet regardless of that success, Daimler’s shares have gyrated violently whenever China sneezes, as have other German automaker stocks.

Daimler and BMW have lost a combined €24 billion in market capitalisation since the start of December on fears their China sales will come unstuck if the yuan falls and the Chinese economy stalls.

A devalued Chinese currency would harm the ability of local buyers to afford luxury imported vehicles and push up the cost of importing components from Europe for the vehicles the car makers produce in China.

But to an extent, we’ve been here before.

When the Chinese stock market crashed in August and China’s central bank moved to devalue the yuan, some analysts predicted German car makers would soon be forced to warn on profits.

It didn’t happen.

Make no mistake, China is hugely important for Germany’s car makers.

BMW’s China sales increased from 11.6% of the total in 2010 to 21.6% in 2014.

But a plunging Chinese stock market doesn’t lead automatically to ‘carmageddon’, mainly because ethe stocks aren’t widely held, nor must a devaluation prove disastrous because German car makers are manufacturing an increasing proportion of vehicles locally with Chinese joint venture partners.

Daimler’s exuberant sales somewhat exaggerate the health of Chinese demand.

Its performance is explained partly by its rebound from a faulty Chinese sales and distribution model that Daimler has since fixed.

Some German car makers have fared less well of late in China, with Audi recording a 1.4% sales drop in 2015.

In the first 11 months, BMW sales only rose by 2.4%, compared to the double-digit growth it enjoyed there in the past.

Yet, Mercedes-Benz is selling cars that rich Chinese consumers evidently still want.

Sales of the S-Class saloon are booming, regardless of the supposed “new modesty” in China after a crackdown on corruption.

China accounted for one-third of all S-Class sales last year.


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