Key Observations from the 2012 Beijing Motor Show

　　By Bill Russo （罗威）

　　1. Background of Beijing Motor Show

　　The eleventh China International Automotive Exhibition held in Beijing in 2010 attracted automakers from 16 countries. More than 2,100 automakers and auto parts enterprises displayed their products and services at the China International Exhibition Centre. In total 990 vehicles were on display, of which there were 89 world debut Cars, 65 concept cars and 95 new energy vehicles. This International Auto Show has set a new record for both the number of show cars and attendance. We anticipate this BJ motor show will surpass the previous one in number of audience and show car models.

　　In the year 2009-2010, China automotive market witnessed explosive growth primed by economic subsidies & incentive coupled with strong underlying economic drivers. Cars were being sold like hot cakes because supply was satisfying the stimulated demand.

　　However within short span of time the situation has changed dramatically. The expiration of subsidies coupled, with high inflation and increased interest rates have dampened auto demand to 2.45 % in 2011. The challenge is not just limited to slowing demand. The pressure on margins has built further due to increasing cost of marketing (advertising), higher investments necessary to reach consumers in distant lower tier markets, rising fuel and raw material costs.

　　• The theme of this 2012 show is Leading through Innovation”. Innovation has became a central theme in the strategy for defining a compelling value proposition in a hyper-competitive market. Carmakers will use to auto show platform to showcase innovative products and technology in order to win the media and audience attention on this stage.

　　2. Key highlights for the Must See Models and emerging trends behind that

　　2.1 Trend: Increasing importance of Coupe and Crossover vehicles

　　Driven by increased young generation buyers (Post-80s) and their dynamic styling preference, there are a variety of coupe and crossover concept vehicles to show and launch during this motor show. The most expected mass brand products are the sporty VW Polo GTI, Passat All track, and coupe, VW CC V6. For luxury brands, Audi TT RS Plus, new MB SL and CLC, BMW 6 series Gran Coupe are noteworthy. Emphasis is not only about upgrading engine output, new segment offerings like SUV or Station Wagon, but also offering various exterior/interior accessories and options to create a distinctive image. Those models will expand their in-market sedan line up and grab more buyers from their traditional competitors.

　　2.2 Trend: Luxury brands downsize their product line up to smaller vehicles

　　In view of growing number of entry-level buyers and their inherently lower budgets, luxury brands are downsizing their segment offerings to reach a lower their brand’s entry-level price through introducing micro and small vehicles to China. Typical examples are Asia debut of MB A-class, Audi new A3, global debut of Audi A1 5 door. Such new initiatives are expected to lower the luxury brand price point to 200k CNY and below.

　　2.3 Trend: SUV and Sports-Tourer continue to gain the ground of both show stage and market.

　　Both international and local brand have recognized the growing consumer interest in SUVs, particularly compact sized and fuel-efficient versions. The vehicles worth watching include the Asia debut of MB GLK refresh models, the new Lexus RX and LX, BMW M6, Infiniti JX35, as well as Buick Encore, Ford Kuga and eCoSport. For China domestic brands, Great Wall is going to launch their topline SUV, H7 equipped with 3.0L Diesel engine, Chang’An and Geely will also announce their new SUV products.

　　2.4 Trend: Luxury brands customize and diversify their styling design and performance to increase consideration

　　Individuality is driving the design and development of well-established luxury vehicles. Such trend is evident in BMW’s Mini brand, which is offering three London Olympics limited versions (Baker street, Bays Water and Cabrio Highgate in different styling and trim.

　　2.5 Trend: New energy vehicle launch is shifting focus from EV to Hybrid among international carmakers, while local makers are still in concept stage with NEVs

　　Consumer surveys show the new energy vehicles should not be targeted at the mass-market buyers, but rather, higher income and open-minded premium car owners and intenders. Such a trend drives more international carmakers to introduce their hybrid models to China for both brand marketing and sales reasons. In contrast, local brands have made little progress in commercializing their NEV products; therefore, most of their show cars are still in the concept and prototype stage. Typical examples of international brands are the Asia debut of BMW 5 series hybrid and Infiniti Long wheel base M35 hybrid. Local brands like Dongfeng, BYD and Chery continue to show their plug-in and pure electric vehicle concept cars.

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　　Bill Russo, is a Senior Advisor with Booz and Company. He lives in Beijing and has 25 years of experience in the automotive industry, including serving as Vice President of Chrysler's business in North East Asia from 2004 until 2008.