China auto show highlights SUVs in slowing market

BEIJING (AP) - Automakers are showcasing a new generation of luxurious SUVs at China's biggest auto show of the year as they battle for buyers in its cooling, crowded market.

Honda Motor Co. on Monday held world debuts for two SUVs among dozens shown by global and local automakers. Sales of SUVs, the popular option on China's rough roads, soared 52 percent last year, the only product segment that still is growing in the world's largest market. Sedan sales contracted by 5.3 percent and those of minivans plunged 17.5 percent.

"We're seeing a surge of SUV sales in China," said Renault-Nissan's CEO Carlos Ghosn, "In our opinion, this is a trend which is going to continue."

The SUV boom is a financial lifeline to the industry and has allowed local brands to claw back market share from global rivals by offering budget-conscious buyers SUVs priced as low as 45,000 yuan ($6,900). But the flood of new models is crowding the market and squeezing products.

As many as 50 new SUVs are due to be launched in China this year by global and Chinese brands, according to research firm IHS Automotive.

Already, local manufacturers Great Wall Motor Co. and Changan Automobile Group have been forced to cut prices on their flagship mid-size SUVs.

"The pricing situation is getting tougher. This is obvious," said Joachim Wedler, president of Audi China.

Still, automakers see strong growth potential in a market with rising incomes and low vehicle ownership rates. But Beijing and other major cities are trying to curb congestion and smog by imposing limits on new car ownership, which forces automakers to look for buyers in smaller cities where incomes and profits are lower.

Automakers face a "tougher environment," said John Lawler, chairman of Ford Motor Co.'s China unit.

"The market is acting much more like a mature market than a developing market and we need to adjust to that," Lawler said.

On Saturday, Ford unveiled an updated version of its Kuga SUV with an improved engine, entertainment center and other features. Ford also sells the Echosport, Edge, Everest and Explorer SUVs in China.

On Monday, Chinese brand Geely debuted its Emgrand GS SUV, designed by a team led by a veteran Volvo Cars designer who moved to the Chinese automaker after it bought the Swedish brand in 2010.

Chinese rival Chery Automobile Co. displayed the new Tiggo 7, due to go on the market in the third quarter of this year. Previous Tiggos have sold well in Russia and other developing markets.

Many of these models are never meant to be driven off-road and come with heated seats, entertainment centers and other luxury features.

Also Monday, the original off-road brand, Jeep, showed off a version of its Renegade, due to be manufactured in China. That will allow Jeep to avoid stiff import taxes and sell at a sharply lower price, expanding its market to younger, lower-income drivers, said Mike Manley, Jeep's chief operating officer.

Automakers also displayed electric and hybrid sedans and SUVs, which many see as the industry's future, though sales today are tiny.

"By 2020, we see 10 to 20 percent of our (product) mix being electrified," said Ford's Lawler.