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January 23, 2013

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Home » Business » Autotalk Special

SUV reigns as king of the road in China

FRIENDS, relatives and acquaintances of mine who buy or dream of buying sports utility vehicles often puzzle me.

They invariably talk about how the elevated driving position and beefy build of SUVs create a sense of control and security amid traffic chaos. They praise the large cabin space and carrying capacity, which enable their entire family to travel in style and comfort on a relaxing weekend outing. They effuse about how the all-terrain capabilities of these gas-guzzlers allow adventurous trips off the beaten track.

One thing they rarely talk about is fuel economy. When I ask about the costs of filling those big gas tanks amid today's rising prices, they simply shrug their shoulders as though it's a minor niggle.

If pressed about the disadvantages, some do admit that SUVs are monsters to park on crowded city streets. Others acknowledge that they have never taken the vehicles off-road and rarely even go on getaway trips out of town.

As China's love affair with the SUV enters its second decade, I keep wondering why the fascination persists. Vehicle manufacturers apparently have no such qualms. They keep rolling SUVs off the assembly lines, with at least 15 new models to be unveiled this year.

Double-digit sales

For China's auto industry, 2013 will no doubt be another year of the SUV. It's the only vehicle segment that holds promise for double-digit sales growth amid a general slowdown in the overall market.

Last year, deliveries of SUVs in China surged 25.5 percent to 2 million units, far outstripping the 7 percent growth of passenger cars. The SUV market share has more than doubled in 10 years to over 13 percent, though it still lags the levels of more mature markets.

In the US, birthplace of the vehicle, SUVs account for a quarter of sales.

The history of the SUV may give some insights into its enduring popularity.

When Detroit rolled out pickup-based SUVs for family use in the 1990s, Americans seemed intrigued by their solid structure, big horsepower and model names that suggested adventure, exploration, and exotic destinations.

In fact, the only inhospitable place most SUVs ever face is the concrete jungle of cities. In response, manufacturers lowered the vehicles' clearance and retuned the suspension system for paved roads. Eventually in the mid-1990s, Japanese carmakers struck pay dirt by basing the frames of SUVs on the frames of popular smaller sedans.

The trend caught on like wildfire. Today, such crossover models, known as "city SUVs," have become the mainstay of the segment. In other words, motorists could dream of adventure in the rough while driving vehicles adapted for city life.

SUVs have become chic lifestyle purchases that project a rugged image even if they never leave an urban setting. Last year, city SUVs dominated China's top-10 sales list of SUVs, accounting for almost two-thirds of sales in the segment.

It's been a bonanza for manufacturers. Developed mostly on the existing platforms of A-segment compact cars, city SUVs are selling at prices of almost B-segment ones - a third or even sometimes double the cost of their small cousins.

Extra money

Most consumers seem willing to pay the premium, perhaps perceiving that the high, spacious interior and off-road capabilities are worth all the extra money.

According to a study by the Beijing-based market research firm Sinotrust, the majority of SUV drivers in China are second-car owners who wanted something bigger, more powerful and more versatile after buying a family sedan.

The nation's SUV boom reached 100 percent sales growth in 2010. It was perhaps a pinnacle in the car ownership explosion that seized China in the last decade. Nowadays, many first-time car buyers are choosing entry-level SUVs over compact sedans.

Is China's SUV craze simply a result of aspirational shopping? To some extent, I think it is a natural progression in an emerging consumer market.

As a recent study by audit, tax and advisory firm KMPG points out, "while the trend among cost-conscious consumers in mature markets is to downsize to smaller, more fuel-efficient vehicles, a sizeable proportion of consumers in the BRIC markets still aspire to own bigger cars, such as SUVs."

It's all a bit surprising when you consider that China's fuel prices nearly tripled in the past decade as annual SUV sales surged 15-fold, even outpacing the 10-fold increase for sedans.

It just goes to show how a car's core attributes, like cost-effectiveness, can be outweighed by perceptions of its status and "personality" in the value system of Chinese consumers.

For them, a privately owned vehicle is not only a convenience of transport but, above all, an announcement of "having arrived."

If one wants to find a simple logic behind China's SUV-mania, that will be it. Like it or not, the country's love affair with SUVs shows no sign of abating. Sinotrust forecasts the vehicles will continue to dominate the dreams of motorists until 2020.

In major coastal cities, the trend in the car market is for upgrading into higher-value vehicles. In smaller third- and fourth-tier cities, a wave of first-car buying has yet to move up the chain.

China's single-child generation has four parents to take care of, creating a need for big, comfortable vehicles.

Relentless attempts by the Chinese government to control traffic and car ownership may ironically fuel the market for ever-larger, more luxurious vehicles because people who win lotteries or auctions for license plates tend to want to splash out for the car of their dreams - and SUVs rank high there.

For the rich, it might be a Porsche Cayenne, Audi Q7 or Land Rover Range Rover. For the middle class, popular choices are the Volkswagen Tiguan, Honda CR-V or Toyota RAV4. And for cash-strapped consumers, there are the BYD S6, Great Wall Hover and Chery Tiggo.

But do people really need gas-guzzlers? It is a highly subjective question. I don't know the answer, but I do know how easy it would be to justify any excuse for a little indulgence and overconsumption.




 

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