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Audi speeds past rivals in mainland elite fleet deal

By Tong Hao (China Daily)
Updated: 2009-06-25 07:51

While BMW is likely to walk away empty-handed from China's lucrative government car procurement market this year, its German peer Audi has been dominating the market for a long time.

The Procurement Center of the Central People's Government (PCCG) said last Thursday that it has no plan to buy BMW cars this year.

In contrast, government procurement contributes about 20 percent to Audi's total sales in China, according to Zhang Xiaojun, deputy managing director of Audi China's Sales Division.

In 2008, Audi sold 119,598 sedans in China, a 17 percent increase year-on-year. China is now Audi's second biggest market in the world, only behind Germany.

The money Audi has made from Chinese government procurements and its avoidance of major public controversies should be the envy of other German luxury car competitors.

The image of an "official car" has helped Audi beat BMW and Mercedes-Benz, two other German brands which are also eligible for government procurement in China, the only market where Audi leads in luxury sedan sales.

"Government procurement has a direct influence over vehicle consumption of ordinary people. If a customer sees a model that is the same as the governor's, he will probably take it into first consideration. That's a big reason why foreign automakers pay so much attention to government market," said Hu Xiaowu, professor, School of Social and Behavioral Sciences, Nanjing University.

Compared to Malaysia, India, Japan and other countries that strictly require officials to use homemade cars, it is common for Chinese officials to favor foreign luxury cars.

"The higher the level of government, the higher the request for luxury. If the price of two cars is the same, officials always prefer the foreign brand," said Chen Min from Geely, a domestic automaker in China. Chen is responsible for government procurement of the company.

In 2005, Audi launched a new, prolonged sedan model A6L in China and it is now the most popular model among Chinese officials.

BMW got enrolled by PCCG only now.

"BMW cars have been involved in several traffic accidents in recent years and its reputation is not good among ordinary Chinese people. Besides, the central government calls for priority to domestic brands in the 4-trillion-yuan stimulus package. The news thus raises public dissatisfaction," said Hu.

Absence of domestic competitors is also a reason for the success of foreign automakers like Audi in Chinese government procurement market.

According to the standard set in 1999, sedans for officials at the minister and province governor level should be within 450,000 yuan with engine size less than 3.0 liter; vice-minister and vice-governor level within 350,000 yuan less than 3.0 liter; officials at other levels within 250,000 yuan less than 2.0 liter.

The price of Audi A6 and A6L sedans is around 300,000 to 700,000 yuan with engine size around 2.0 and 3.0 liter, which mostly covers the price and engine limit, while the highest price of domestic cars like Geely and Chery is about 100,000 yuan with engine size around 1.6 liter, much lower than the lowest limit.

"Our products are not high-end enough, which restricts the level of our target market. Our products can only sell to low level government officials at present," Chen said.

According to Chen, although vehicles of Geely were enrolled by PCCG in 2008, not a single car has been sold to the central government till now.

(For more biz stories, please visit Industries)

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