Ultra-luxury brands may lost high profits after the dramatic drop in market growth rate

Because of the“sequela”from rapid expansion, after many years rapid development in Chinese market, ultra-luxury cars has slowing down its development. As the data shows, in Chinese market, most ultra-luxury car companies has a decrease in sales, even many companies shows negative trends, some new projects are stagnate. More and more dealers are drop out from sales network, it becomes the miniature of ultra-luxury brands slowing down the growth in China.

Some study reports show that luxury car sales account for 4% of total sales in China, but in mature markets like Europe and U.S.A, this number is about 14%. Which means there still have large space for luxury car to growth in Chinese market.

Data shows that in 2013 Bentley’s global sale has a growth of 19%, but it has a decline of 3% in Chinese market. However, Bentley’s sale in Chinese market increased 23% and 100% in 2012 and 2011.

Same situation happens to luxury sport car, according to data from Ferrari, the company sold 554 new cars in 2013, decrease nearly 1/3 compare to 2012. in 2012 the percentage of Chinese market in global markets also dropped from 10.7% to 8%. Same as Ferrari, the sport car brand Lamborghini also suffered from declining in sales. In 2013, Lamborghini delivered 2121 cars, compared 2083 cars in 2012, its has only increased 1.8%, and the company only sales 267 cars in China, it has a 16.7% decrease compare to 2012.

However, not all luxury brand sales are declining, Rolls Royce remains a double-digit growth in Chinese market in last year. Data shows in 2013, Rolls Royce delivered 3630 cars to clients, it has a growth of 1.5% compare to 3575 cars from 2012. Chinese market has a growth of 11%, 1107 cars sold to Chinese market, account for 1/4 of global sale in last year.

Comparison between Rolls Royce and Bentley, some analysts believe that the reason for rapid growth of Rolls Royce in last year is because Bentley’s sales base is higher than Rolls Royce, Rolls Royce’s sale quantities are much lower that Bentley, therefore, it is relatively easier to maintain a high growth rate for Rolls Royce.

In recent years, the growth rate in Chinese market are over luxury car brands’ expected, hight growth rate of the market also keep a rapid growth in luxury car demand. Even the whole market has slowdown in the growth rate, there are less impact in luxury brands, sales still continue to growth.

However, Chinese government start to against the waste, and advocate austerity. Lamborghini was the first company warned that Chinese luxury car market my slow down the growth rate. Stephan Winkelmann, the CEO of Lamborghini said “declining sales in Chinese market has become Lamborghini’s current challenges , China is a huge market, but according to the Chinese government 's recent advocacy and policy, it is hard to see clients to purchase luxury goods agin a a short term”

The government advocacy and policy is one of the most important reason to slowdown the growth of luxury cars in Chinese market, but it is not the only reason. Too fast growing in sales channels are one of the other reason to slowdown the growth rate. In recent years, both Rolls Royce, Lamborghini, Ferrari, Maserati, Bentley and other luxury brands in China are planed to expand their sale channels in China. Previously, most of these sale channels are in first-tier cities, and recently, those companies are expend their sale channels to the second and third tier cities, which has a large number of“invisible rich people”.