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China Luxury Car Sales Seen Beating U.S. by 2016

China premium car sales will probably surpass the U.S. as early as 2016 and equal that of Western Europe by 2020, driven by rising incomes in the world’s second-largest economy, according to McKinsey & Co.

Demand for luxury vehicles in China is expected to more than double by 2020 to 3 million from the 1.25 million cars sold last year, outpacing the total market, McKinsey said in a report released today. Deliveries of upscale autos will probably reach 2.25 million by 2016, according to McKinsey’s estimates.

Automakers from General Motors Co. to Nissan Motor Co. are expanding their premium brands to compete for luxury buyers in China, where German marques led by Volkswagen AG’s Audi account for about 80 percent of sales, according to McKinsey. Ford Motor Co. plans to start sales of its Lincoln nameplate in China next year, while PSA Peugeot Citroen is readying its flagship DS dealership in Shanghai.

“Even now, China’s premium car market presents a sizable opportunity for latecomers,” Sha Sha, Theodore Huang and Erwin Gabardi at McKinsey wrote in the report. “Japanese and U.S. attackers still have a chance to create a market footprint.”

Luxury car sales have increased 36 percent annually in the past decade, compared with the 26 percent rate for the total passenger-vehicle market, according to McKinsey. The segment remains attractive for automakers as 111 large Chinese cities still don’t have premium car dealerships, according to Morgan Stanley & Co.

Premium Sales

Audi sales in China and Hong Kong rose 30 percent last year to a record 405,838 units. German luxury nameplates accounted for 80 percent of premium car sales in China last year, with the remaining shared by other European, U.S. and Japanese brands, McKinsey said.

In its survey of Chinese consumers, 59 percent of respondents said they won’t choose a local brand when buying premium vehicles, while 16 percent believe a Chinese automaker will never be able to produce a luxury model that garners global recognition.

Women are also becoming more important as buyers of premium cars and they value exterior styling, safety and comfort, according to McKinsey, which surveyed 1,200 consumers in 12 large Chinese cities for its report.

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