On China's roads, where luxury risks becoming ordinary

Reuters

By Samuel Shen and Norihiko Shirouzu

GUANGZHOU, China, Nov 21 (Reuters) - Luxury car dealers areresorting to offering customers massages, mini-golf and othergimmicks, hoping this will give them an edge in a ferociouslycompetitive Chinese market where brand loyalty is less commonthan in the West.

Premium car sales slowed in China last year as the economyeased off the throttle and new Communist Party leadership wasinstalled, but momentum is returning, and China is set toovertake the United States as the world's top luxury car marketby 2020 with annual sales of close to 3 million cars.

A victim of its own recent success, the Chinese market hasbecome a hyper-competitive battleground. Five years ago, therewere fewer than a dozen luxury car models sold under fivepremium brands. Today, that has exploded to more than 90 modelsoffered by 25 brands, says market research firm TNS.

China last year displaced the United States as BMW's leading market, and the German premium brand sold317,822 vehicles in January-October of this year, a fifth morethan a year earlier. Porsche increased its Greater China sales last year by 28 percent to31,205 vehicles, closing in on its sales in its biggest market,the United States.

Liu Zheng, a 54-year-old history professor in Shanghai andowner of a BMW 5-Series sedan, sums up the problem facingpremium carmakers such as BMW, Mercedes-Benz andVolvo.

"On Chinese roads, there are too many BMWs, too manyMercedes, too many Audis," said Liu as he lookedaround a downtown Shanghai store for a new China premium brandcalled Red Flag, made by state-owned FAW Car Co Ltd."There are very few Red Flag cars. If you own one, people wouldfeel you're unique."

As Western premium brands have become almost commonplace onChinese city streets, monied locals have scaled further up toAston Martin, Porsche, Jaguar and evenMcLaren, Ferrari and Lamborghini to stand out from the crowd.Ford is launching its storied Lincoln brand in China nextyear, adding to a competitive field that also includes the likesof Infiniti and Tesla.

Audi will open its Innovation Exhibition at the Guangzhouauto show on Thursday, showcasing its technologies and conceptcars such as the Crosslane Coupé, as well as the new generationAudi 3, including the plug-in hybrid A3 Sportback e-tron.

"China is the market with the highest competition. There'sno other market that offers more brands," said Boris Weletzky, aBeijing-based BMW sales-and-marketing executive tasked withleading the German firm's charm offensive to give its brand morecachet, and stop drivers like Professor Liu, from defecting.

LITTLE LOYALTY

A majority of car buyers in China, including those splurgingon top-of-the-range premium models, are first-time buyers andhave little loyalty to any global brand.

In an attempt to sway Chinese hearts and minds,Mercedes-Benz plans to build a brand museum in Beijing, a movethat Volvo is also considering. Ford recently sponsored aclassic car exhibition on Shanghai's Bund with its historicLincoln models, while General Motors plans to allow somepotential buyers inside its Cadillac plant in Shanghai to seetheir cars being assembled, according to Bob Socia, president ofGM China.

Dealers at BMW and Mercedes-Benz outlets offer select buyerspomp and ceremony at the clinching of a deal - includingribbon-cutting, hand-shaking, photo-taking and a banquet. SomeLand Rover Jaguar showrooms provide massage services and videorooms, and its newly-opened Shanghai store comes complete with amini-golf site.

BMW this year opened a store on the former Expo grounds inShanghai that doesn't aim to sell a single car.

The German firm's Future Retail Brand Experience Centerrather 'sells' the BMW story, through historic model displays,photos and film. The aim is to hype the brand's heritage in amodern, art-gallery type environment.

"BMW was an admirable brand, but now people (in China) seeBMW, Mercedes and Audi as mass luxury brands," said John Shen,senior partner at consultancy Roland Burger. "BMW and others aretrying to revitalize their brands, to create more emotionalvalues, more unique experiences at the retail level."

BMW's levers for differentiation, being tapped as part ofthe Future Retail initiative launched in 2011 in Britain, theNetherlands, France and China, are two-fold: Driving thebrand-enhancing effort, as in the Shanghai experience centre,and a new, non-pressure sales environment it is creatingthroughout its 200 retail outlets across China.

The company will deploy a so-called Product Genius - who isnot a salesperson and isn't there to quote prices or push deals- at each BMW dealer in China. Interested customers areencouraged to drop in and browse - much as they might at a Pradaor Gucci boutique - and they are given the kind of attentiveservice a visitor might expect from Four Seasons and RitzCarlton hotels, Weletzky said.

Potential buyers will be able to configure their virtualdream BMW car on an iPad with a Genius, and then watch theresult projected on a giant screen through 3D glasses.

At the 2-storey, glass-panelled BMW brand experience centrein Shanghai earlier this month, Li Fuxi, an Audi-driving businessman from a small town in the eastern province of Anhui,sipped a cappuccino at the centre's mini-coffee bar.

After an hour spent with the Product Genius, hearing talesof BMW and its history, Li was warming to the brand.

"This place makes me feel good," he said. "I might even buyan i3," he added, referring to a BMW electric car due to hitChinese showrooms next year.

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