Can Every Car Company Have 20% of the China Luxury Car Market?

China became the largest car and light truck market in the world when it passed the U.S. two years ago. This has prompted all of the big auto manufacturers to quicken their efforts in the People’s Republic. They compete both against each other and against local car firms. Now that the Chinese upper-class is relatively large, auto makers have begun to focus on market share for expensive cars.

The mid-priced market in China is already dominated by GM (NYSE: GM) and Volkswagen. Each has been selling cars in the world’s most populous nation for decades. Their successes have caused a rush of competition from other large manufacturers like Ford (NYSE: F) and Toyota (NYSE: TM).

Luxury cars tend to have higher profit margins than small and mid-sized vehicles do. That fact has led to series of announcements from high-end vehicle manufacturers indicating that they intend to do well in China.

The latest proclamation comes from Nissan, which markets the Infiniti luxury brand. The brand has not done well in the U.S., where its sales have been overwhelmed by BMW, Mercedes, Toyota’s Lexus brand, and locals Lincoln and Cadillac. There is no reason to believe Infiniti will do any better in China, but Nissan says it plans to have 8% of the market by 2016. Bloomberg reports that Infiniti’s current share is 2%. Leader Audi has a 34% share and BMW has 22%.

It is difficult to see why Nissan thinks that Infiniti can succeed in China while it has done poorly in every other large market. Nissan has been tempted to speak about its future success in the People’s Republic instead of referring to its current numbers, which speak for themselves. But Nissan knows its investors are anxious to see why it has not done better in China, and the company wants to give those shareholders some hope.

Not every car company can have the level of market share that Audi and BMW have in China. No one can show that either manufacturer will lose what it has. Each fights from the high ground, where brands and dealer networks give them advantages. Some of the luxury brands will fail in China, but  none of the companies involved will admit that.

Douglas A. McIntyre