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Rolls-Royce China Sales Flatline Amid Xi Austerity Drive

Photographer: Qilai Shen/Bloomberg

A Rolls-Royce Motor Cars Ltd. representative describes the features of a Phantom automobile to a group of visitors during the media preview of the China (Guangzhou) International Automobile Exhibition in Guangzhou, Guangdong Province, China. Close

A Rolls-Royce Motor Cars Ltd. representative describes the features of a Phantom... Read More

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Photographer: Qilai Shen/Bloomberg

A Rolls-Royce Motor Cars Ltd. representative describes the features of a Phantom automobile to a group of visitors during the media preview of the China (Guangzhou) International Automobile Exhibition in Guangzhou, Guangdong Province, China.

Rolls-Royce, the ultra-luxury car brand owned by Bayerische Motoren Werke AG (BMW), expects sales growth to slow in China this year as an austerity push by President Xi Jinping damps luxury demand.

Sales volumes in the company’s second-largest market will be little changed from 2012, Paul Harris, Asia-Pacific regional director for the brand, said in Sydney yesterday. By comparison, Rolls-Royce sales rose 16 percent to 998 vehicles last year, according to estimates at research firm LMC Automotive.

Slowing growth in China for the maker of the $380,000 Phantom mirrors the slide in demand this year for sorghum liquor, hand-made tea and Bordeaux wines, as economic expansion cools and the country’s new administration acts to curb spending by government officials. More high-end goods such as luxury cars and yachts may be taxed as part of reform plans this year, the China Daily reported in May, citing an official at the top economic planning agency.

Slowing growth in China is “caused by a whole range of things, including rumors about luxury taxation that doesn’t seem to have transpired,” Harris told reporters at an event to introduce the Wraith sports coupe. “The government rumored it, and now they’ve backed off, it appears. But we never know, because in China we know things do change with a degree of rapidity.”

He didn’t give numbers for the brand’s sales, adding that China accounted for about 35 percent to 40 percent of the 3,575 cars Rolls-Royce sold globally during 2012 and would make up a slightly smaller proportion of the total this year.

The company is still pursuing plans to increase the number of dealerships in the country to 20, he said. Its Beijing and Shanghai dealers are the best- and third-best performers for the brand, according to company data.

Slowing Growth

China’s new government is trying to rein in credit growth while shifting away from infrastructure investment toward consumption, without slowing growth in the world’s second-largest economy.

A private survey yesterday showed China’s manufacturing sector weakened by more than estimated in July, and authorities have lowered growth forecasts to a minimum of 7.5 percent this year and 7 percent in future, from a previous lower limit of 8 percent.

Government and Communist Party agencies will be banned from constructing new buildings for five years and existing projects should be put on hold, the government said in a website statement July 24.

Rolls-Royce, founded in 1904, expects the U.S. to grow faster than China and be its largest market this year, Harris said.

Japan Demand

It’s also seeing stronger growth in Japan in the wake of Prime Minister Shinzo Abe’s attempts to use monetary policy to weaken the yen and kickstart that country’s economy, Dan Balmer, Rolls-Royce’s Asia-Pacific general manager, said in an interview at the Wraith event. The carmaker opened a new dealership in Osaka earlier this year, he said.

The company’s latest two-door A$645,000 ($597,000) Wraith sports coupe is targeted at Western drivers who are more likely than Asian consumers to favor such models, Harris said.

Average prices of imported cars in China, which are usually luxury models because of a 25 percent import tax, fell 3.4 percent in April from a year earlier, according to government data.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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