China Sees Increase in Sales of Compact SUVs

China Sees Increase in Sales of Compact SUVs One Chinese operations manager is looking for a bigger car for his family and is planning to trade up from a compact sedan to a sports utility vehicle. He is just one of the increasing ranks of middle class consumers that are upgrading to sports utility vehicles and is heating up competition between domestic car makers and global giants.

A decrease in gasoline prices is one of the main factors that drive SUV sales in the U.S. but in China other forces are at work. Growing wealth is crucial, but limits the number of new license plated in congested cities are stopping consumers to pick a bigger and more pricer rides when they have the chance to buy. Shifting towards larger and family friendly vehicles can be help by demographics after loosening up of the one child policy last year. By looking at Chinese consumers several car firms are now developing compact SUVs that is better suited in the high density urban environment that full sized gas guzzlers

The growth pace of China’s overall car sales slowed with the cooling economy, but SUV sales are now outpacing purchases of sedans. Analysts are estimating that around 5.2 million SUVs will hit the market in 2015 up by 27 percent compared to the 1 percent increase in sedans. Demand for SUVs are pushed by wider availability of  financing and a more regular car replacement cycle is forming as the market matures.

Caps on new license plates in cities such as Beijing wherein 120,000 new license plates are available for conventionally fuelled cars will be done through lottery boosted the demand for SUVs or multi purpose vehicles such as minivans at the expense of sedans. The restriction was meant to combat congestion and minimize emissions pushed consumers to look at bigger SUVs even with the odds of getting a license plate is 164 to 1.

One of Asia’s largest car show will kick off this April 22, known also as the Shanghai auto show will see more SUV showcased as Honda plans to unveils a prototype that is tailored to the Chinese market.

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