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Mercedes-Benz has shifted its focus to more expensive models in recent years, and its car sales in China fell 9% in the first half of this year compared with the same period last year. Mercedes-Benz CEO Ola Källenius said China’s luxury market is cooling, which he blamed in part on China’s real estate crisis. “We don’t know how long it will take for Chinese consumers to regain confidence.”
Bill Russo, former president of Chrysler China and founder of Automobility, said foreign automakers other than Tesla have “collectively failed to pivot in the face of the shift in Chinese consumer preference toward electric vehicles.”
However, Yum China CEO Joey Wat was more optimistic with investors this week after the operator of Pizza Hut and KFC in China reported better-than-expected first-half results, with net revenue rising 8% to $212 million.
“It seems fashionable to be bearish on China these days. But … even at its current growth rate, China still accounts for nearly a third of annual global growth,” she said, adding that economic growth had shifted to China’s “second- and third-tier” cities.
“Last year alone, China opened 400 shopping malls, mostly in second-tier cities and below…How many countries in the world have 400 shopping malls today?”
But she did admit that “business is tough right now” and did not expect the market to change this quarter.
Beverage group Anheuser-Busch InBev blamed weak consumer demand and bad weather in parts of the country for a 15% drop in second-quarter sales in China.
Chief Executive Michel Doukeris said the trend of drinking less and paying more in China continued despite lower consumer spending. “I think the long-term fundamentals are still there,” he said.
Executives and analysts also warn of the long-term threat posed by growing competition from a growing number of Chinese brands.
Lei Xiaoshan, managing director of Shanghai-based China Market Research Group, said that despite the bright spots, many foreign brands face strong domestic competitors. “Many Western brands have lost out to Chinese brands in the competition,” he said.
Edward White and Thomas Hale in Shanghai, Madeleine Speed, Daniel Thomas and Claire Jones in London and Patricia Nielsen in Frankfurt © 2024 Financial Times.
This article was first published Published in the Financial Times.
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