Sales of luxury cars in China slowed sharply last year, with Audi and Mercedes Benz of Germany both failing to meet their targets.

China’s auto market, once seen by many foreign carmakers as virtually untapped frontier territory, saw sales growth last year slow to 15 percent after an explosive 75 percent in 2003, according to Xinhua.

Xinhua said Audi, a part of the Volkswagen group that has a joint venture with China’s First Automotive Works Corp., sold 64,018 cars last year for a gain of only 0.8 percent from 2003 when Chinese sales had soared more than 70 percent.

Mercedes-Benz saw combined sales on the Chinese mainland and in Hong Kong rise 5 percent to 11,500 last year, with its top of the range S Class sedan accounting for more than 50 percent.

Both luxury carmakers, however, failed to meet their sales targets in China last year, the Xinhua report said, with Audi having planned to sell 80,000 cars and Mercedez-Benz 13,000-14,000.

Another German luxury car producer, BMW, said last month its sales in China last year actually fell 16 percent to 15,500 after skyrocketing 176 percent in 2003.

“These luxury carmakers’ weak performances in China were largely the result of a sharp deceleration in the overall domestic car market last year,” said Jia Xinguang, chief analyst of China Automotive Industry Consulting and Development Corp.

In a separate report, Xinhua said China’s auto industry was moving into a “conscious restructuring and consolidation” period that would see the number of domestic automakers dramatically reduced.

A joint research project by the Ministry of Commerce and the China Automotive Technology Research Center said automakers with capacity below one million units annually will not be able to survive and those with capacity of two million units will face restructuring pressure.

By 2006, the largest four automakers in the world would have a combined Chinese market share of nearly 80 percent, it said.

Automakers with small production scales, weak technological strength and high production costs will be shaken out of the market or have to merge with heavyweight players.

(Shenzhen Daily February 16, 2005)