China’s efforts to reel in on public servants’ desire to be chauffeured around in pricey luxury cars is starting to have an effect: year-over-year prices for luxury automobiles are down 3.4 percent in April, according to the latest figures from China’s National Development and Reform Commission, which monitors auto prices.
Earlier this year, new President Xi Jinping pledged to crack down on public servants’ growing tastes for luxury goods, a potent and unwanted symbol reflecting the obvious discord between the government’s Communist ideology and the desire of its wealthier denizens for fancy leather interiors and finely tuned European sedans.
Meanwhile, prices for domestic-brand passenger cars -- perceived by some Chinese consumers as cheap and dangerous compared to the better-made foreign brands – ticked up 0.2 percent, possibly due to the higher demand forced on public servants.
Starting this month, the country’s military was barred from putting government plates on luxury cars as part of an effort to preserve the government’s “People’s Republic” image despite the country’s position as the fastest-growing market for luxury brands.
China is home to 1.35 billion people, of which approximately 7 percent -- a figure that varies roughly one or two percentage points in either direction depending on the study used -- fit into the categories of upper middle class and upper class.
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The immediate effect on luxury car prices felt by the crackdown on public servants use of them suggests just how many of those wealthier citizens are government workers.
China’s General Administration of Customs reported a 19.4 percent decline in luxury car imports in the first quarter, led by upper-single-digit drops for cars made by Audi AG (FRA:NSU), Bayerische Motoren Werke AG (FRA:BMW) and AB Volvo (STO:VOLV-A), according to Chinese news service Caijing. Growth in the luxury auto segment declined 8.4 percent in the same period compared to last year. Volkswagen AG (ETR:VOW3), which owns the Audi brand, said last week demand for its Bentley marque was down 20 percent in the first three months of the year on low volume of 438 units, according to company-provided data cited by the Wall Street Journal.
The demand for luxury automobiles will likely continue to be spurred by the growing number of private citizens with more cash to spend on wheels -- this despite the 25 percent tax on imported luxury cars. With the growing number of rich in China, the market for fancy stuff probably won't go away just because the government is concerned about the tarnishing of its Maoist reputation.
“Prices of imported cars may continue to slide and demand will mainly come from private buyers in the future,” Cheng Xiaodong, of the National Development and Reform Commission, told Bloomberg News.