SUVs take off in China

May 6, 2012 at 12:00a.m.

Los Angeles Times

BEIJING

Fuel-efficient vehicles are the rage in the United States, but in China, gas-guzzling SUVs are looming large.

Automakers including Ford Motor Co., Chrysler Group, Daimler and Land Rover are seizing on soaring popularity for the vehicles here, tailoring new models for Chinese consumers, and in some cases, shifting manufacturing to China.

Chinese drivers purchased about 2.1 million SUVs last year, according to LMC Automotive, a figure that’s expected to double by 2014. That would put China neck-and-neck with the U.S., the world’s top SUV market, despite steep import duties and luxury taxes that can drive prices for some models well above $100,000.

“The luxury buyers cannot get enough,” said Michael Dunne, the Indonesia-based head of auto consulting firm Dunne & Co. “It’s ironic. Ten years ago, no one wanted to touch an SUV in China. They were considered construction or farming vehicles. They were associated with labor or hard work.”

No more. High-end SUVs have emerged as the stars of the recent Beijing auto show, dazzling crowds with their massive engines, spacious cockpits and frills such as heated leather seats, virtual assistants and retina displays.

Maserati showed off the crossover Kubang, the Italian brand’s first SUV. Scheduled to begin production in 2013, the vehicle is expected to retail for more than $100,000. Lambor-ghini showcased a concept car called the Urus, its first stab at a sport-utility vehicle in nearly two decades. The Italian automaker has no firm production plans for the car, much less a suggested sticker price. But that hasn’t stopped some Chinese buyers from trying to purchase one.

Wealthy Chinese covet SUVs for the status that their size and luxury convey. Some are also looking for safety in a nation where deadly auto accidents are soaring.

“The view of the road is better in an SUV and it’s more comfortable to drive,” said Beijing motorist Deng Nan, 28. A manager at a logistics company, he recently paid about $65,000 for a Land Rover Freelander.

Consumers’ infatuation with super-sized vehicles comes despite obvious drawbacks. China’s big cities are notoriously congested, and many streets and parking spaces are impossibly narrow. Gasoline costs $4.43 a gallon. China’s one-child policy means that families are small and have less need for rolling cargo haulers. Air quality in the nation’s mega-cities is putrid.

“It’s hard to think of a more regressive type of vehicle in a dense urban setting than an SUV,” said Karl Fjellstrom, a director for the Institute for Transportation and Development Policy, based in the southern Chinese city of Guangzhou. “They take up more space in parking and when moving demand a wider berth from other road users, consume more fuel and emit more pollution.”

The world’s largest automobile market, with 18 million vehicles sold last year, China has pledged billions of dollars to research development of cleaner cars and trucks. But the fruits of those efforts are years away.

Meanwhile, SUVs, with their spacious interiors and muscular frames, have overtaken most other vehicle segments in sales growth. Sales grew 18 percent to 441,600 units in the first quarter compared with the first three months of 2011, according to the China Association of Automobile Manufacturers, even as total vehicle sales declined 3.4 percent over the same period because of the nation’s sluggish economy.

“This is the only segment with double-digit growth,” said Namrita Chow, a Shanghai-based analyst at IHS Automotive.

She said SUVs have significantly higher profit margins than sedans, giving manufacturers every incentive to push the segment here at a time when global sales remain slow.