Although the Chinese car market is expected to see growth of around 10% this year, prospects for premium brands have deteriorated as a result of the Chinese government's anti-corruption campaign, according to LMC Automotive.

European premium car brands such as BMW and Audi (Mercedes-Benz lagging a little) have rapidly grown their Chinese sales in recent years and highly profitable China sales have provided a big boost to bottom lines when other markets have been weak. However, the exceptionally good times in China for the premiums may now be over.  

Speaking at a conference in London, LMC analyst John Zeng told delegates that the government's campaign is already impacting sales. “Imports of cars have slowed [many of which have been premium brand models] dramatically in the first quarter,” Zeng said. “The crackdown is not very good news for European luxury carmakers this year. In the first quarter, luxury car sales only grew by 8.5% - a much lower growth rate than for the industry as a whole and that's the first time we have seen the luxury segment lagging behind other segments. Until recently it was the strongest performing segment. The super-luxury brands such as Ferrari are already in negative growth territory.”

Zeng said that Beijing's anti-corruption campaign is causing demand for luxury goods in general to fall as affluent Chinese consumers become much more cautious about displaying their wealth. He also said that signals from the government suggest the campaign has further to run.

“The signals we are picking up suggest it will run for at least another year,” he said. 

Zeng also noted that the Japanese OEMs struggled in the first quarter with sales well down on last year due to the ongoing 'islands dispute' between China and Japan, which boiled over into anti-Japan protests and demonstrations last year. “That is benefiting some companies,” Zeng noted. “Ford sold around 100,000 Focus models in China in the first quarter, a very big increase on previous sales levels.”

LMC Automotive forecasts that  the Chinese light vehicle market will grow to 21.3m units in 2013 and that by the end of this decade will be nudging 35m units a year (with passenger vehicles – cars – at 25m units a year).