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DATE News (chronologically)
04/24/08
automotive
Gas guzzlers a hit in China  High, wide and fuel-hungry, the gleaming black Cadillac Escalade on display at the Beijing auto show is an unlikely car for an era of record oil prices.

But while sport utility vehicle sales in the U.S. are tumbling, automakers are finding that for China's newly prosperous car buyers, bigger is still better.

So General Motors Corp. has made the Escalade a star of its auto-show display and is eager to get it on the market here.

"If you look at the fastest-growing market segments in China, there are two -- SUVs and luxury cars," said Joseph Y.H. Liu, GM China's vice president for sales and marketing.

Auto sales in China are booming, with analysts and automakers forecasting growth at 15-20 percent this year. But demand for the biggest vehicles is even stronger, with sales of luxury cars and SUVs expected to surge by 40-45 percent.

The phenomenon is welcome news for automakers seeing little or no growth in the United States, Europe and Japan. They also make fatter profits from sales of high-end vehicles than from economy models.

Low gas prices spur buyers
Sales have been boosted by economic growth that has topped 10 percent for five straight years and a surge in real estate and stock prices that created a new crop of Chinese billionaires.

Buyers of land yachts have also been unintended beneficiaries of a government policy meant to help the poor. Beijing has tried to shield farmers and the urban poor from high oil prices by freezing pump prices for gasoline and diesel, keeping them among the world's lowest. That takes the sting out of filling up a gas guzzler.

Gas costs 5.34 Yuan (76 cents) a liter or 20.5 Yuan ($2.90) a gallon. State oil companies are barred from passing on rising crude costs to consumers, instead covering their losses out of profits from their drilling units.

Both foreign and Chinese automakers are using the Beijing show to highlight luxury sedans, muscle cars and SUVs. It opens to the public Thursday after a weekend press preview.

On Sunday, Daimler AG CEO Dieter Zetsche was joined onstage by film star Zhang Ziyi to unveil a top-of-the-line Mercedes-Benz SUV, the GLK, which goes on sale in China next year.

Daimler says Mercedes sales in China surged 42 percent in the first quarter. Sales of R-class minivans jumped 110 percent while those of M-, G- and GL-class SUVs doubled. The company says China is the second-biggest market for its S-class sedans, behind only the United States, and accounts for one-third of global Mercedes sales.

GM showed off its new Cadillac CTS sedan, which it said was designed with China in mind. It added a bigger back seat to the basic CTS model sold worldwide, since many Chinese owners sit in back while a chauffeur drives.

Cadillac's entry in the SUV competition, the Escalade, can seat up to eight people and gets an estimated 12 miles per gallon. It goes on sale in China next year.

For SUV sales, "the volume is low but the growth rate is high, and we're all trying to get into this segment," said Robert Socia, executive vice president of Shanghai General Motors, a GM joint venture with a Chinese partner.

By contrast, GM's SUV sales in the United States fell 22 percent in March from the same month last year. More at Detroit News

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