Tiger moms craving SUVs drive next wave of Chinese demand

Written by Bloomberg | Updated: Apr 23 2012, 15:07pm hrs
Zhou Na, a 37-year-old Beijing mother, says she knows why sport-utility vehicles are the fastest-growing segment in the worlds biggest automobile market: Kids. I have to drive my kid around practically non-stop on Saturday, said Zhou, who ferries her eight-year-old son to Kung Fu and English classes on weekends to the Childrens Palace of Beijing before joining her friends for yoga. Its pretty tiring, but I feel very good driving my BMW X5 around.

Zhou represents the growing army of so-called tiger moms who may fuel the next spurt of growth for the automotive industry in China, where the middle-class population is projected to double over the next decade. Bayerische Motoren Werke, Daimler and Ford Motor are among automakers unveiling new models, particularly SUVs, at next weeks Beijing International Automotive Exhibition to vie for families looking for a second vehicle to drive around children and buy groceries.

You look at the trend for more utility and family-oriented vehicles and behind that is women, said Bill Russo, a senior adviser at Booz & Co and formerly Chrysler Group LLCs China head. In the US, we call it the soccer moms. SUV demand in China jumped 20% last year, more than triple the growth in total passenger-car deliveries, according to data from the China Association of Automobile Manufacturers. SUV demand continues to outpace other vehicle segments, with sales up 18% in the first quarter, bucking the slump in the broader market, where deliveries fell for the first time since 2005.

Car sales increase

The average Chinese consumer now earns more than $4,000 a year, crossing a threshold that Macquarie Group says typically spurs car purchases to increase at twice the pace of income growth. A car parked outside follows on the heels of home ownership as part of the middle-class Chinese dream, Janet Lewis, a Hong Kong-based analyst at Macquarie, wrote in a February report. Private car ownership was not common prior to 2000, but a family car is quickly becoming a desired and attainable consumer product. Chinas middle-class population will reach 600 million to 800 million in the next 10 to 15 years, compared with about 300 million now, according to Macquarie.

Tiger Moms

For tiger moms and other moms SUVs offer great appeal as the whole family can be transported safely and in style, said Trevor Hale, Fords Shanghai-based spokesman, in reference to the nickname coined by author Amy Chua for strict Chinese mothers. We see great potential to grow this segment and are bringing more of our SUVs to China.

Ford will display three SUV models at the Beijing auto show, including the Kuga thats aimed at families with a small child. The Dearborn, Michigan-based carmaker currently sells the imported Edge SUV in China and plans to build the Kuga at a new plant in Chongqing, southwest China, Hale said. BMW will show the X3 xDrive 28i and revamped X6 at the Beijing show, which opens to the public on April 27. Sales of BMWs X-series SUVs surged 92% in the first quarter to more than 20,000 units, according to the company. Porsche AG, which depends on the Cayenne for half of its deliveries, will show a refreshed version of the luxury SUV. Maserati will exhibit its new Kubang, which the company said it expects to go into production in 2013. Volkswagens Lamborghini will unveil an SUV study at the Beijing show, almost two decades after discontinuing the so-called Rambo Lambo military vehicle, a person familiar with the companys plans said in February.

Year of SUVs

Automakers are swooping in with SUV models, even those that never had SUV models before, said Zhang Zhiyong, an independent automotive analyst based in Beijing. The segment is getting more crowded, which will definitely lead to price competition.

That doesnt deter Daimlers Mercedes-Benz, which predicts 2012 to be the year of the SUV for the German carmaker, which will unveil its China-made GLK in Beijing next week. Mercedes-Benz boosted SUV sales in China by 85% last year, while total sales in the country rose 35%. With the rising middle class in the country, SUVs are among the most popular choices for Chinese consumers, said Bjorn Hauber, executive vice president of sales and marketing at Mercedes-Benz (China) Ltd. Demand for SUVs will continue to increase as more families buy their second car and the number of women owners increases, said Hui Yumei, head of automotive research at Sinotrust International Information & Consulting (Beijing) Co.

Changing Times

Most Chinese families had one car and its driven by the men, said Hui. Times have changed and therere now more women car owners. SUVs will be the most important segment for automakers in China for a long time. Automakers are counting on Huis prediction to come true after sedan sales in China declined 2.2% in the first quarter, weighed by record fuel prices and a slowing economy.