Automakers See Chance to Go Big in China

Growing Prosperity Fuels a Surging Demand for SUVs and Luxury Sedans

BEIJING, April 21 -- High, wide and fuel-hungry, the gleaming black Cadillac Escalade on display at the Beijing auto show is an unlikely car for an era of record oil prices.

Although U.S. sport-utility vehicle sales are tumbling, automakers are finding that for China's newly prosperous car buyers, bigger is still better.

So General Motors has made the Escalade a star of its auto-show display and is eager to get it on the market here.

"If you look at the fastest-growing market segments in China, there are two -- SUVs and luxury cars," said Joseph Y.H. Liu, GM China's vice president for sales and marketing.

Auto sales in China are booming, with analysts and automakers forecasting growth at 15 to 20 percent this year. But demand for the biggest vehicles is even stronger, with sales of luxury cars and SUVs expected to surge by 40 to 45 percent.

The phenomenon is welcome news for automakers seeing little or no growth in the United States, Europe and Japan. They make fatter profits from sales of high-end vehicles than from economy models.

Sales have been boosted by economic growth that has topped 10 percent for five consecutive years and a surge in real estate and stock prices that has created a crop of Chinese billionaires.

Buyers of land yachts have been unintended beneficiaries of a government policy meant to help the poor. Beijing has tried to shield farmers and the urban poor from high oil prices by freezing pump prices for gasoline and diesel, keeping them among the world's lowest. That takes the sting out of filling up a gas guzzler.

Gas costs $2.90 a gallon. State oil companies are barred from passing on rising crude costs to consumers, instead covering their losses out of profits from their drilling units.

Both foreign and Chinese automakers are using the Beijing show to highlight luxury sedans, muscle cars and SUVs. It opens to the public Thursday after a weekend news media preview.

On Sunday, Daimler CEO Dieter Zetsche was joined onstage by film star Zhang Ziyi to unveil a top-of-the-line Mercedes-Benz SUV, the GLK, which goes on sale in China next year.

Daimler says Mercedes sales in China surged 42 percent in the first quarter. GM showed off its new Cadillac CTS sedan, which it said was designed with China in mind. It added a bigger back seat to the basic CTS model sold worldwide, since many Chinese owners sit in the back while a chauffeur drives.