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Exotics rebound as China's rich consumers snub Xi's austerity drive
Bloomberg | 2017/4/21

SHANGHAI -- Four years after China's President Xi Jinping started cracking down on corruption and conspicuous consumption, the most extravagant fast cars are making a comeback.

Chinese sales at Ferrari and Aston Martin are approaching their 2013 peaks, following tumbles of as much as 20 percent in 2014, according to data compiled by Bloomberg Intelligence.

Maserati, McLaren and Porsche had their best year ever in 2016. Lamborghini also is on the mend after deliveries plunged by more than half from 2013.

"The outlook is looking pretty good for us here in the China market," Reid Bigland, chief of Fiat Chrysler Automobiles NV's Maserati and Alfa Romeo divisions, said in a Bloomberg Television interview at the Shanghai auto show. "With us, we just haven't felt it," he said, referring to the impact of the crackdown on consumption.

Xi hasn't ended his drive to curb wasteful spending by officials and eliminate graft. Instead, private consumption is filling the void left by extravagant gifts aimed at currying political favor.

The number of Chinese millionaires rose 10 percent last year and is expected to more than double to over 1.7 million by 2026, according to research by Johannesburg-based consultancy New World Wealth. Consumer confidence is the highest since the global financial crisis amid a strengthening Chinese economy.

Snapping up
Bloomberg Intelligence analyst Steve Man says consumers have become inured to Xi's campaign.

"Business owners are coming back into the market to snap up these vehicles," he said. "The improvement is very encouraging for China. It could point to a potential improvement in the entire luxury auto market."

A 10 percent "super luxury" tax announced by the Ministry of Finance in December to "guide reasonable consumption" and cut emissions hasn't damped the lust for cars costing more than 1.3 million yuan ($189,000).

"Yesterday I received another 60 orders for our Mulsanne extended wheelbase. It's our flagship model, and it's the most exclusive and expensive model on the stand," Bentley CEO Wolfgang Durheimer said at the Shanghai show. "And obviously the Chinese customers that still like to be driven really go for this model."

Durheimer said he expects to set a new sales record for the Bentayga SUV in China this year.

Maserati, McLaren
For the year to date, Maserati's sales have surged 119 percent. Bigland plans to increase the number of outlets for the Maserati and Alfa Romeo brands in China by 50 percent to as many as 75 by the end of the year.

McLaren Automotive expects to sell 300 cars this year in China, after nearly doubling sales to 235 in 201. A culture of motor sports has begun to develop, said sales chief Jolyon Nash.

Ferrari Greater China maintains a pivotal position in the carmaker's global strategy, Ferrari said in a statement.

"China is the fastest growing luxury marker" said Andy Palmer, Aston Martin's chief executive officer. The luxury SUV is a market that was "originally driven by the Chinese. That's a perfect example of why China is important."

Aston Martin has a full order book for 2017 for its DB11 coupe, Palmer said, who is "pretty confident" the carmaker will hit its target of selling 270 cars this year -- up from 170 in 2016 -- and plans to "stretch the team" to win more orders.

Genesis, Acura
It isn't just the super-rich who are splurging. At a somewhat lower price, demand for BMWs and Audis is growing as well. Total sales in China's premium-car market may surge to 3 million units per year in a decade from 2 million now, said Audi chief Rupert Stadler in Shanghai Wednesday.

Honda Motor Co.'s Acura brand aims to sell 30,000 vehicles this year, while Hyundai Motor Co. is planning to bring its Genesis luxury brand as early as next year.

Xi, who succeeded Hu Jintao as China's leader late in 2012, has shown no sign of abandoning his anti-corruption drive. His signature campaign has struck fear across the government and helped him consolidate more power than anyone since Deng Xiaoping.

In 2016, 415,000 officials were punished, a 23 percent increase from the previous year, according to government statistics. 

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