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China Luxury Cars Sales to Beat U.S. by 2020

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A new report from McKinsey & Company (link opens in PDF) estimates that sales of premium cars in China will surpass U.S. sales by 2020.

Concurrent with China's economic boom, luxury-car sales have increased at an annualized rate of 36% in the past decade, while passenger-vehicle sales have improved an average 26% per year. In 2012, the Chinese bought 1.25 million premium vehicles, second only to the Americans' 1.7 million purchases.

The consulting firm expects that annual sales will reach 3.0 million in China by 2020, compared with just 2.3 million in the United States. This estimate is a result of a reduced 12% annualized increase for the next eight years but still represents the fastest sales growth of any country.

In a 1,200-person consumer survey, McKinsey found that "reflection of social status" and "self-indulgence" served as primary reasons for premium upgrades.

In what may prove a troubling sign for international luxury-car manufacturers such as Tata Motors (NYSE: TTM  ) , maker of Jaguar and Land Rover, 66% percent of respondents believe that a Chinese automaker will produce internationally recognized luxury cars within 10 years. When asked if they would choose a Chinese premium car, 41% responded affirmatively.

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  • Report this Comment On March 10, 2013, at 10:37 AM, dkangan wrote:

    In the spirit that "past results do not guarantee future returns," readers should be aware that the growth rate reported is an "annualized" rate. Luxury car purchases soared in China in late 2011 when the government severely restricted the purchase of dwelling units in an effort to curb the explosion in cost of housing, and prosperous people with no where else to put their money bought expensive automobiles. That "luxury" car market is widely populated in a range from stripped down Japanese high line and German models to the very top end Italian cars driven by the uber rich and top governing class.

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