Mercedes: heading for a struggle in China - Shaun Rein

Shaun Rein

Until last year Mercedes sold its sedans like hot buns on the China market. But the preference for SUV's and higher-profile competition makes the future less certain for the German car market, writes business analyst Shaun Rein in Business Week.

Shaun Rein:

Demand is so strong for high-end SUVs that the Porsche Cayenne has a six-month waiting list and is barely discounted, if at all. Mercedes rolled out the GLK SUV at the 2008 Beijing auto show, but wealthy Chinese considered it low-end at a mere $50,000. The M-Class, an older luxury SUV, is boxy and plain and lacks the handling ability of its rivals. Mercedes needs to roll-out a high-end, more muscular SUV. 

Finally, Mercedes’s dealer network suffers from the worst satisfaction scores achieved against BMW, Audi (NSU:GR), Maserati, and Porsche, based on customer satisfaction surveys and mystery shopping that we completed. Common complaints have been that Mercedes salesmen were “unhelpful”, “unknowledgable,” and “unprepared” to deal with customer questions. 

Mercedes can certainly rebound in China. It still has strong brand resonance and in the next quarter will likely benefit from Chinese boycotts of such Japanese brands asLexus (TM) and Infiniti (7201:JP). If Mercedes can release new models at different price points—yet maintain a cohesive brand positioning—it has a chance to return to the top ranks of luxury automakers in the world’s biggest auto market.

More in Business Week. Shaun Rein is a speaker at the China Speakers Bureau. Do you need him for your meeting or conference? Do get in touch or fill in our speakers' request form.

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China's rich get richer and more confident - Shaun Rein

Shaun Rein

Luxury good producers like Louis Vuitton and Porsche do not have to panic after Robert Frank's WSJ article suggesting China's wealthy stop spending. Frank looked at the lower middle class, argues business analyst Shaun Rein in CNBC. According to his research, the real wealthy Chinese spend more than ever.

Shaun Rein:

The results show the ultra rich, people worth more than $10 million, are actually getting richer and remain very confident about their earning ability and those worth more than one million dollars also reported being very confident. The vast majority reported that they planned to spend at the same or higher level in 2012.  One businessman in the services sector in Shanghai told me, “The economic problems are serious but we expect profits to rise by 30 percent next year. Even if profits don’t go up, I plan on spending at the same levels or more.” 

What do these wealthy Chinese want? Our research suggests that they are continuing to go for ultra-high end products and are looking to buy luxury cars like Mercedes and BMW. Restrictions on the number of houses one can buy and a weak stock market is also making the wealthy spend more and invest less. 

The result is that exclusive brands, like watch and jewelry brand Van Cleef & Arpels for instance, will continue to do well in 2012 as the wealthy start to differentiate themselves from others. Many wealthy Chinese told us they are tiring of the more popular luxury brands like Louis Vuitton because they are becoming too common.

 More in CNBC.  

Shaun Rein is a speaker at the China Speakers Bureau. When you need him at your meeting or conference, do get in touch or fill in our speakers' request form.

More links to Shaun Rein and his upcoming book The End of Cheap China in Storify.

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