Despite the severe contraction in sales in January and February 2020 due to the COVID-19 lockdown, sales of premium and luxury cars began to recover from March, as the pandemic gradually came under control and affluent consumers started spending again. To revive the slumping car sales, national and provincial governments in China began to offer stimulus measures since March, providing subsidies for new car purchases.
In order to offset the effects of the pandemic, manufacturers and dealers began to offer massive discount promotions to boost their sales from March onwards. Leading brands such as Mercedes-Benz, BMW and Audi offered 20-25% price discounts across their entry-level and high-end models, also offering free gifts such as iPhones or coupons for Hermès handbags.
While other leading brands experienced significant contractions in their sales, Tesla posted positive year-on-year sales growth in 2020. The company has continuously reduced its price: in 2019, as the US and China agreed to reduce tariffs on US-made vehicles from 40% to 15%, Tesla reduced its price.
Providing there is a continuation of the current recovery momentum, premium and luxury car sales are expected to recover by 2023, posting a high single-digit CAGR. As overseas trips will remain limited in the near future due to the ongoing pandemic outside China, consumers’ “revenge spending” is expected to intensify further, boosting premium and luxury car sales.
As the Chinese government decided to extend the NEV (new energy vehicles) purchase subsidies and tax exemption to 2022, sales of electric vehicles are expected to remain positive in the forecast period. NEVs, such as battery electric vehicles, plug-in hybrid electric vehicles and fuel cell electric vehicles, have been heavily promoted by the Chinese government since 2013, when the state government first introduced the subsidy programme for NEVs to address the air pollution issue.
Unlike other key markets such as the US and Europe, China has a higher proportion of younger consumers in premium and luxury car sales. Growing up in the era of the booming local economy, the current young generation consider a luxury car not only as a status symbol but also symbolise their personal identity.
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This report originates from Passport, our Luxury Cars research and analysis database.
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