McKinsey: SUVs to remain the primary driver of auto sales in the next 5 years

Sport-utility vehicle sales is expected to remain primary source of growth for China’s auto market in the next five years, according to a report released by consulting firm McKinsey & Co today.

In 2022, one out of every two cars sold in China will be a sport-utility vehicle, and it is estimated that sport-utility vehicle segment will retain strong appeal due to China’s consumption upgrade, launch of new models and large number of first-time car buyers, according to the reort.

"Sport-utility vehicle segment will continue to dominate China's car sales growth. This segment is expected to account for 60 percent to 70 percent of total sales growth in China, while sedan and multi-purpose vehicle segment contribute a small part of the overall growth," said Arthur Wang, partner at McKinsey & Co.

Car manufacturers face fiercer competition in sport-utility vehicles segment, and “SUV segment is becoming an increasingly crowded battleground among brands,” the report said.

It also pointed out that intensified competition will be seen due to more sport-utility vehicle models to be launched in China. In the first half of this year, a total of 32 SUV models have been launched here, up from 26 SUV models in 2016 and 16 models in 2015.

“The competition will become fiercer in medium and premium sport-utility vehicle segment due to the consumption upgrade,” said Ting Wu, partner at McKinsey & Co.

Car makers are launching more premium sport-utility vehicles to avoid fierce price wars in the lower-price market segment, according to the report. 

Chinese auto maker Great Wall has unveiled a premium brand named Wey which expects to sell models priced above 200,000 yuan. Geely also said its model under Lynk & Co brand which boasts technological backup from Volvo will hit the domestic market this year.