SUV makers flock to China as sales boom

Automakers are rushing to cash in on China's growing passion for SUVs, with sales up five-fold in the last half-decade, as increasingly affluent urban consumers seek to showcase their wealth.

Once associated with rural life in China, the SUV, or sports utility vehicle, is increasingly favoured by city-dwellers, and manufacturers flocked to Beijing to display their models at the country's largest auto show this week.

Zheng Chengfei, editor of the China SUV Weekly, forecasts sales in China will grow between 20 and 30 percent in 2012, with more energy-efficient urban and compact models likely to lead the market.

"China's SUV buyers want a powerful car that reflects their rising social status," Zheng told AFP, adding most SUVs were sold to successful urban professionals.

"They are looking for a big car with lots of space so they can get away for a relaxing weekend with the entire family, including grandparents."

The China Association of Automobile Manufacturers says sales of the powerful off-road vehicles topped 1.59 million last year -- up 20 percent from 2010 and five times higher than five years earlier.

Daimler AG, which owns the Mercedes-Benz brand, is among the foreign carmakers seeking to further tap into the lucrative sector in China -- the world's biggest auto market.

"It's a combination of emotion and utility which ultimately leads to this strong development of SUVs around the globe, including China," said Dieter Zetsche, chairman of Daimler AG and head of Mercedes-Benz Cars.

"The main purpose is not to get off road onto the top of mountains, but to differentiate yourself from others, with the additional benefit that you have this higher seating position that gives you this kind of 'in control' feeling."

China emerged as the world's top car market in 2009, but the sector stalled dramatically last year, with sales rising just 2.5 percent to reach 18.51 million units after the government rolled back auto-purchase incentives.

Nonetheless, carmakers remain confident of continued steady growth in the Asian nation, where three out of every four new car purchases are by first-time buyers.

Beijing has implemented several policies to try to wean the country away from its growing dependency on oil -- one of which has been to try and promote new energy-efficient vehicles.

It has put pressure on foreign car makers to invest in the clean energy field in cooperation with their Chinese joint-venture partners, and is pushing for more transfer of technology.

But sales of environmentally-friendly, fuel-efficient vehicles in China have been sluggish, prompting foreign carmakers to step up their focus on the SUV market.

Mitsubishi president Osamu Masuko said at the Auto China 2012 show the Japanese company was setting up a joint venture with China's Guangzhou Automotive this year to produce up to 300,000 SUVs annually within five years.

US auto giant Ford plans to introduce three new SUVs in China this year, including its new compact model, the Ford EcoSport, and its Ford Explorer -- the epitome of a rugged gas-guzzling off-road vehicle.

"The Chinese consumer continues to be very interested in international brands for the technology, the quality of the craftsmanship, the brand reputation," said Joe Hinrichs, president of Ford Asia Pacific.

Chinese automakers are also producing a wide range of SUVs, with Changchun, BYD and Chery all introducing home-grown compact vehicles, China SUV editor Zheng said.

"Although most SUVs are being sold in urban areas, we are expecting to see solid growth in the mountainous and desert regions in (China's) west, where the need for all terrain vehicles are especially strong," he said.

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