Luxuray cars keep rolling in China

The automotive makers appear ready to declare that luxury is back in China, this week General Motors as well as Toyota both unveiled top-of-the-line models at the Guangzhou auto show that opened Monday.

China’s automotive markets have defied the global economic slump and has surged a staggering 38% through the year, helped largely by stimulus packages to boost small-car sales in corporate, car hire and van hire agencies, as well as private retailers. However demand in the country’s strong luxury car segment has slowed because of slower growth in China’s coastal regions, which are heavily dependent on exports that were badly hit by the slump.

Now, the global auto makers are seeing the old vigor returning to China’s premium market thanks to the economic recovery.

Demand for luxury goods and cars “will come back,” GM China President Kevin Wale said in an interview, after helping unveil the redesigned SLS, a top-end car aimed squarely at China’s market.

“The economy is strong here, and along with that goes more income generation, and more luxury auto sales,” he said. When momentum returns, “it’s going to be very extensive growth.”

Mr. Wale said sales declined this year in part because GM was slow to respond to last year’s move by the Chinese government to encourage consumers to buy smaller cars through tax increases for vehicles with engines bigger than three liters.

Most analysts echo GM’s forecast. Yale Zhang, a senior Shanghai-based analyst with U.S. consulting firm CSM Worldwide, said he expects China’s premium-car segment to grow 26% to 315,000 vehicles next year. By comparison, sales this year are likely to grow only about 6% to 250,000 vehicles, he said.

Helped by China’s overall economic recovery, especially in exports, and improving consumer access to car loans, luxury-car sales “will likely rebound strongly next year,” Mr. Zhang said.