2. CHINA
IS PROJECTED TO SURPASS JAPAN
to become the world’s number one market
for luxury goods in total spending,
growing from $12B in 2010 to $27B in 2015.
Source: CLSA Asia-Pacific MarketsSource: McKinsey, “Understanding China’s Love for Luxury” 3/11
DEMAND ESTIMATES OF
CHINESE LUXURY GOODS
15
17
20
22
25
28
31
34
37
41 44
31
38
46
56
69
82
98
118
141
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
0
50
100
150
200
26
169
percent of global luxry market
Greater China demand (billion Euro)
0
10
20
30
40
50
%
4 5

3. Source: CLSA 2/11 Source: IMF 2010, Euromonitor 7/10
FROM L ACK OF AT TENTION
TO CENTER OF AT TENTION
1999 2010 2020
1% 15% 44%
FROM RAGS TO RICHES, BABY!
Per Capita
1978 2000 2003 2008 2010
$400 $800 $1,000 $3,000 $4,000
Total GDP in PPP terms
Rank Country – 2010 GDP (U$ Million) Country – 2020 GDP (U$ Million)
1 USA 14,802,081 China 28,124,970
2 China 9,711,244 USA 22,644,910
3 Japan 4,267,492 India 10,225,943
4 India 3,912,911 Japan 6,196,979
5 Germany 2,861,117 Russia 4,326,987
6 Russia 2,221,755 Gemany 3,981,033
7 United Kingdom 2,183,277 Brazil 3,868,813
8 France 2,514,399 United Kingdom 3,360,442
9 Brazil 2,138,888 France 3,214,921
10 Italy 1,767,120 Mexico 2,838,722
6 7

4. LET’S UNDERSTAND WHAT
“RICH” MEANS IN CHINA.
Source: McKinsey, “Understanding China’s Growing Love for Luxury” 3/11
BEIJING & SHANGHAI
ACCOUNT FOR 21% OF LUXURY
CONSUMPTION TODAY AND WILL
ACCOUNT FOR 20% IN 2015.
VERY WEALTHY
Annual salary of > $150K.
By 2015, 1M households will
reach this category. Growth of
20% per year.
Drive 38% of growth over the
next 5 years.
WEALTHY
Annual salary of $45K – $150K.
By 2015, 5.6M households will
reach this category.
Growth of 15% per year.
MIDDLE  UPPER
MIDDLE CL ASS
Annual salary of $15K – $30K.
Currently 13M households.
By 2015, 76M households will
reach this category, accounting for
22% of the luxury purchases.
8 9

5. 9 L ARGE MARKETS
(Chongqing, Dongguan, Foshan, Guangzhou, Hangzhou, Nanjing, Shenzhen, Tianjin and Wenzhou)
ACCOUNT FOR 1/3 OF LUXURY
CONSUMPTION TODAY AND WILL
STILL ACCOUNT FOR 30% BY 2015.
THE NEXT
25 DEVELOPED CITIES
SUCH AS XI’AN ACCOUNT FOR
25% OF LUXURY CONSUMPTION
TODAY AND ARE PROJECTED
TO TAKE 26% BY 2015.
10 11

6. IN ORDER TO UNDERSTAND THIS
GROW TH, WE HAVE TO LOOK AT
CHINA’S HISTORY AND CULTURE
IN THE CONTEX T OF THEIR
PERSPECT IVE ON LUXURY.
Source: McKinsey, “Understanding China’s Growing Love for Luxury” 3/11
LUXURY CONSUMPTION GROW TH WILL BE PRIMARILY DRIVEN
BY UPPER MIDDLE CL ASS AND WEALTHY CONSUMERS
Share of urban households by household income class
Millions of households, percent
>200K
223
38
55-100K
<55K
22
2
100-200K
273
25
273
4
2010 2015
6
54
43
28 43
0
-4
4
2010 2015 CAGR
>1MN2
300K-1MN
200K-300K
0.2 0.4 20
1.2 2.0 15
K 0.7 1.2 18
Share of urban households by household income class
Billion RMB1
, percent
>1MN2
-80
11
200-300K
<55K
5
300K-1MN
-180
25
4
2010 2015
45
37
33
15
-6
18
100-200K
55-100K
12
26
25
2
1
201
0
3
18
-6
34
CAGR (‘10-’15)
percent
CAGR (‘10-’15)
percent
wealthy (200K+) Mass Affluent (200-300K) Upper middle class(100-200K) Lower middle class (55-100K) Aspirants (<55K)
12 13

7. TR ADI T IONAL
CONFUCIANISM
EAST
MODERN
MATERIALISM
WEST
TR ADI T IONAL
CONFUCIANISM
EAST
MODERN
MATERIALISM
WEST
14 15

8. LUXURY AS DEFINED BY THE EAST. CHINA’S TRADITIONAL CULTURE
STRESSES FRUGALIT Y,
HUMILIT Y, AND
CONSERVATISM
In 2005, the Chinese government introduced
the “modern socialist values” which advocated
“know plain living and hard struggle; don’t
indulge in luxuries and pleasures.”
In 2011, the Beijing government started to
ban the use of words such “luxury,” “royal,”
“supreme,” and “high-class” from all billboards.
Source: Jing Daily 3/11, “The Individual-Oriented and Social-Oriented Chinese Bi-Cultural Self: Testing the Theory.” The Journal of Social Psychology, vol. 148, no. 3.
Extravagant and wasteful
use of wealth; carries a
negative connotation
Pronounced “Shuh-Chi”
=
16 17

9. T R AD I T IO NAL C H I N E SE VALU E S W I T H I N T H E CO N T E X T O F
CONFUCIANISM
1. The value of face
2. Art of gift-giving
3. Evolution of collectivism
THERE’S NO SUCH THING
AS “ME,” IT IS ALWAYS “US.”
Face is a social construct, rather than a personal one
Face not only stands for prestige for yourself but also for
your family, thus it acts as a “SOCIAL SELF”
87% of Chinese agree that saving face is a central part
of their lives
Source: Henriksen, Marie (2009), “Luxury Fever in China,” China Daily 200518 19

10. IN FACT,
THE CHINESE BRAIN EVEN WORKS DIFFERENTLY
WHEN IT COMES TO THIS CONCEPT.
CONSPICUOUS CONSUMPTION
WORKS ONLY IF AND WHEN
EVERYONE IS DOING IT.
“Mian-zi” represents the material prestige, success
and ostentation in luxury consumption in China.
Very similar to the concept of conspicuous consumption
in that the individual is in pursuit of social esteem when
consuming ostentatious luxury brands.
HOWEVER, “mian-zi” prescribes that the individual
acts this way because it is the appropriate thing to do in a
social context.
Source: Chadha, Radha & Husband, Paul (2006). The Cult of the Luxury Brand: Inside Asia’s Love Affair with Luxury. London: Nicholas Brealey International.20 21

11. FROM HERE ON, WHEN WE USE
“CONSPICUOUS CONSUMPTION”
AS A TERM IN CHINA , WE MEAN
BUYING LUXURY AS A MEANS OF
FIT TING IN, NOT STANDING OUT.
THE MOTIVATION BEHIND FACE
CONSUMPTION IS TO RAISE YOUR SOCIAL
STATUS IN YOUR REFERENCE GROUP.
Face consumption can be summarized in three ideas:
1. OBLIGATION Pressured to follow the purchasing habits of your reference group.
2. DISTINCTIVENESS It’s not about being unique, it’s about buying premium
products to elevate your current social status.
3. OTHERORIENTATION Only buy goods that can give face to yourself
and those who are important in your life.
Source: Henriksen, Marie (2009), “Luxury Fever in China,” China Daily 200522 23

12. T R AD I T IO NAL C H I N E SE VALU E S W I T H I N T H E CO N T E X T O F
CONFUCIANISM
1. The value of face
2. Art of gift-giving
3. Evolution of collectivism
Source: Wu, Weiping (2003). “Networking Practice in China” in Reuvid, Jonathan: Doing Business with China. Kogan Page Limited. / Jing Daily 4/10
GIF TGIVING
ES TAB L ISH ES AN D MA INTA INS SOCI AL T IES ,
AN D I T IS AL SO USED TO GI VE O R SAVE FACE .
The notion of a “gift economy” is well known
and consists of the personal exchange and
circulation of gifts.
Guan-xi, or interpersonal relationships
and connections, is often preserved through
gift-giving.
The exchange of gifts creates an ongoing
obligation to reciprocate.
50% of luxury purchases by Chinese in
2009 were gifts, up from 38% in 2008.
24 25

13. THE INTERREL ATIONSHIPS OF IT ALL.
Economic Capital
Luxury Goods
Build Relationships
buyer gains symbolic capital
buyer gains social capital
buys
through gift-giving
Source: Wu, Weiping (2003). “Networking Practice in China” in Reuvid, Jonathan: Doing Business with China. Kogan Page Limited. / Jing Daily 4/10
T R AD I T IO NAL C H I N E SE VALU E S W I T H I N T H E CO N T E X T O F
CONFUCIANISM
1. The value of face
2. Art of gift-giving
3. Evolution of collectivism
26 27

14. Source: The Individual-Oriented and Social-Oriented Chinese Bi-Cultural Self: Testing the Theory. The Journal of Social Psychology, vol. 148, no. 3.
WH EN I T CO M E S T O LUXU RY CO NSU M P T IO N I N C H I NA ,
COLLECTIVISM
IS A D O M I NAT I N G FAC T O R
People influenced by collectivistic values
believe that conforming to the norms set
by their reference group is the proper
way to behave.
If a luxury brand has high, positive
brand awareness, it will create a push
effect within the wider collective.
THE BANDWAGON EFFECT –
The demand of a product increases
because others are buying the same good.
Source: Chadha, Radha & Husband, Paul (2006). The Cult of the Luxury Brand: Inside Asia’s Love Affair with Luxury. London: Nicholas Brealey
International/”The Individual-Oriented and Social-Oriented Chinese Bi-Cultural Self: Testing the Theory.” The Journal of Social Psychology, vol. 148, no. 3.
The Journal of Social Psychology reports that Asian consumers are not interested in the inherent image of a brand,
and that they only care about how the brand is perceived among their peers.
The more famous a brand is, the more likely it is for Asian consumers to buy the brand and the more recognition they get from the public.
THE
BANDWAGON EFFECT
IS A POWERFUL FORCE IN DETERMINING THE
SUCCESS OF A LUXURY BR AND
28 29

15. Source: “The Individual-Oriented and Social-Oriented Chinese Bi-Cultural Self: Testing the Theory.” The Journal of Social Psychology, vol. 148, no. 3.
“At that time, this kind of ring was very popular; all the pretty
girls wore this model, so I decided that I must buy one.”
“If I don’t know the brand, I will not buy it…all my friends are like me.”
“If the price is high, the quality should be good, the company should
be prestigious, internationally famous, and the brand preferable
in the eyes of most people in the high income class.”
KEY TAKEAWAY:
LUXURY COMSUMPTION IS SEEING SUCCESS
DUE TO THE TRADITIONAL NATURE OF THE
CHINESE MARKET, NOT A SUDDEN SHIF T IN
CHINESE VALUES.
30 31

16. “China has no alternative but to follow this (economic growth) road;
it is the only road to prosperity.”
– Deng Xiaoping in 1985
TR ADI T IONAL
CONFUCIANISM
EAST
MODERN
MATERIALISM
WEST
32 33

17. WE’RE SEEING AN
EVOLUTION
FROM TOTAL COLLECTIVISM TO AN
INCREASED LEVEL OF INDIVIDUALISM.
Source: Henriksen, Marie (2009), “Luxury Fever in China,” China Daily 2005
The economy reforms that started in 1978 brought in a rush of Western ideas
and goods, which resulted in an unprecedented level of freedom and wealth.
THE GENERATION BORN AF TER THE ECONOMIC REFORM
EXPERIENCED A SHIF T IN POPUL ATION CHANGE.
China’s population in 1950 stood at 563 million and nearly doubled by 1980.
250 million Chinese between age 15 and 29 were born during the “One-Child” policy.
The traditional bias against females has lead to 32 million more boys than girls under 20.
Source: Slate 11/10, Udel.edu,”Around the World; China” 1/09
32 MILLION MORE THAN
34 35

18. Source: chinasuccessstories 3/08
THE RESULT OF THE “ONECHILD POLICY”
CREATED A NEW GENERATION OF
SELFCENTRIC INDIVIDUALS.
These single children are known as
“little emperors”
6 sources of disposable income
(parents, grandparents, relatives).
Half of urban family’s disposable income
is spent on its youngest member.
Reinforced a strong sense of
individual importance.
Still raised within the same social
construct as their parents.
THE STRONG SENSE OF INDIVIDUAL IMPORTANCE
HAS LEAD TO A NEW T YPE OF INDIVIDUALISM.
A new blend of traditional and modern values has created a new way of
life called the “conformist individuality.”
Individualism is not an end in itself; rather, it is a means to achieve a
higher goal of belonging to a unique clique.
The younger Chinese people face an interesting dilemma: standing out
for the sake of fitting in.
Source: Doctoroff, Tom (2005). Billions: Selling to the New Chinese Consumer. New York: Palgrave Macmillan.36 37

19. Source: McKinsey, “Understanding China’s Growing Love for Luxury” 3/11 / Time “Not Your Mother’s China” 2/08
CONFORMIST INDIVIDUALIT Y HAS FORCED THE
NEW CHINESE CONSUMER TO STAND OUT BY
BUYING LUXURY FOR THE SAKE OF FIT TING IN.
45% of luxury goods consumers are under 35.
Average millionaire is 39, 15 years younger than the
rest of the world.
Income of 20-to-29 year-olds grew 34% from 2006
to 2009, with 1/3 using credit cards.
Some spend up to one month’s salary on a handbag.
CONSPICUOUS CONSUMPTION ADHERES TO
THE EMOTIONAL NEED OF BELONGING.
Chinese people consume
luxury products in order
to fulfill their desires for
social status.
They place higher importance
on extrinsic motivations than
intrinsic ones.
A car is considered one
important indicator of
achievement in wealth.
Source: Fitzmaurice, Julie & Comegys, Charlie (2006). “Materialism and Social Consumption.” Journal of Marketing Theory and Practice, vol. 14, no. 4 / Wong, Nancy & Ahuvia, Aaron (1998).
“Personal Taste and Family Face: Luxury Consumption in Confucian and Western Societies.” Psychology & Marketing, vol. 15, no. 5.38 39

20. Source: Redluxury 2/11, The Huffington Post 2/11, China Daily 6/11
CHINESE MALES’ CONSUMPTION PROFILE
Men account for 45% of $1.2B luxury handbags,
compared to 7% in U.S. (use bag to carry cash).
More than half of the buyers of imported cars
are men; those in their 30’s and younger account
for 55% of the total; 88% used cash.
A 2008 estimate says “Second Wives” or
mistresses account for 1/3 of China’s entire
luxury market spending.
CHINESE FEMALES’ CONSUMPTION PROFILE
Women account for more than half of
$15B luxury market.
76% of Chinese female college grads aspire to
management positions, compared to 52% in U.S.
Women account for 30%and 20% of
Maserati’sand Ferrari’s China sales,
respectively, compared to less than 10% in Europe.
Home to 11 of world’s 20 richest self-made women.
Source: McKinsey 3/11, WSJ 6/11, Center for Work-Life policy 8/2040 41

21. KEY TAKEAWAY:
EVEN THOUGH CHINESE LUXURY BUYERS MAY APPEAR
TO BEHAVE IN AN INDIVIDUALISTIC MAT TER,
THEIR INNER MOTIVATIONS REMAIN ROOTED IN THE
TRADITIONAL BELIEF THAT BELONGING (ON A
LOCAL AND GLOBAL SCALE) IS ESSENTIAL.
Source: McKinsey Insights China – Wealthy Consumer Studies (2008, 2010)
AS THE CHINESE EMBRACE LUXURY, WE’RE SEEING THEIR
COLLECTIVE STANDARD
FOR LUXURY BRANDS
BEING DRIVEN BY INTERNATIONAL SOCIAL ACCEPTANCE.
2008 2010
READYTOWEAR
LEATHER GOODS
JEWELRY
WATCHES
Superior craftsmanship
Internationally well-known brand
Innovative design
Superior craftsmanship
Innovative design
Internationally well-known brand
Superior craftsmanship
Innovative design
Timeless style
Superior craftsmanship
Innovative design
Internationally well-known brand
Superior craftsmanship
Innovative design
Timeless style
Good material
Superior craftsmanship
Innovative design
Superior craftsmanship
Internationally well-known brand
Good material
Internationally well-known brand
Superior craftsmanship
Good material
42 43

22. Source: SCTWeek, “Asia keeps luxury brands rich” 8/10 / Henriksen, Marie (2009), Luxury Fever in China
It is essential that the brand is well known within the individual’s
social circle and that it is recognized as a global standard.
Premium pricing strategy is very effective due to the motto that
the higher the price, the better the status symbol.
Luxury brands should never dilute their international credentials
because the Chinese are buying global success.
LUXURY P RO D UCT S AR E NOT CO NSUM ED
B ECAUSE O F TH E IR UT IL I T Y VALUE ,
BUT TH E Y AR E CO NSUM ED B ECAUSE O F
WHAT TH E Y SYMBOLIZE.
1
IM P L ICAT IO NS FO R
LUXURY MARKETING
IN CHINA
45

23. Source: Bain, “China Luxury Markets Study 2010” 11/10
Saving face now means buying into luxury.
“Our new stores in Tier 2 and 3 cities not only attract
original consumers, but bring in many new consumers.
People in these cities have a strong desire for luxury goods.”
“Emerging middle class in China is trying to improve the
quality of their life,…this is one of the main drivers of
growth of luxury sales in China.”
TH E MA JO R I T Y O F G ROW TH W IL L CO M E FRO M
NEW CUSTOMERS.
2
Source: Henriksen, Marie (2009), Luxury Fever in China
The younger generation dictates the
future of the Chinese luxury market,
yet it carries with it old traditions and
a vision of a materialistic future.
KEEP CHIN ESE P EO P L E’S
“CONFORMIST INDIVIDUALISTIC”
VALUES AT TH E FO R EFRO NT O F S TR ATEGIC P L AN NING .
3
46 47

24. IN CHINA, LUXURY PRODUCTS
ARE COVETED TO CREATE A PERCEPTION OF A SPECIFIC STATUS.
CHINA’S LUXURY MAR KE T IS BOO MING , AN D AUTO B R AN DS
AR E P L AY ING A NOTAB L E RO L E IN THIS G ROW TH .
COMPETITIVE REVIEW
48 49

25. TH E CHIN ESE P EO P L E
ARE BUYING LUXURY.
According to JD Power projections, the luxury car
segment will total 900,000 units this year
More than 1.6 million vehicles will be sold in 2015
Combined sales in Guangdong, Zhejiang, Jiangsu, Beijing
and Shanghai account for 60 to 70 percent of China’s
luxury car sales
http://www.chinadaily.com.cn/bizchina/2011-07/11/content _ 12875205.htm
BUT WHY?
The need/desire to fit in one’s reference group. If a
group of your friends starts driving the 3-Series, you
will not only feel left out but also obligated to drive one
regardless of the cost to save your “face.”
The right car acts as a symbol that you have arrived in
modern China’s elite class.
Driving a luxury car can raise your status; thus you are
perceived to be smarter, wealthier, and better connected.
In return, this can help you in the business world. So, a
luxury car is an investment in your future
50 51

26. LET’S LOOK AT THE TOP BRANDS
52 53

27. 1986 1996
1999
2000
2005
2007
2009
JV with FAW
Audi 100 and 200
start production
China-made A6
into production
Open showroom in
Beijing
Long-wheelbase
A6L launches, as
do A5, S5, and Q5
45% market share -
100,000 units sold
Long-wheelbase
A4L launches, 1st
e-tron model
HISTORY TODAY
SALES
PRODUCTION
ADVERTISING
EVENTS
CAUSE
MARKETING
China is Audi’s
number one market
over Germany for the
first time.
First half of 2011
sales up 28% at
140,700 units.
On-track to sell 300,000
units in 2011.
Increased production
of A4L and A6L
in Changchun.
A6L best-selling model.
Consistent “Truth in
Engineering” tagline
internationally.
Utilize OOH posters.
Encourage consumers
to connect with brand
outside the showroom.
Sponsor premium
sporting and
cultural activities.
Audi Premium
Club.
Partnerhship with
United Nations
Children’s Fund for
“Driving Dreams”
initiative to build
learning centers
in China.
54 55

28. CURRENT MODELS AND PRICES
SEDANS SUV+T T/ T TS
MODEL PRICE MODEL PRICE
A3
A4
A5
A6L
A8L
R8
$41,200$50,400
$44,700
$75,900$150,700
$54,600
$142,700
$358,100
Q5
Q7
TT
$58,300$65,000
$125,300
$79,800
TTS $101,800
“GENESIS” L AUNCH FOR A8
http://www.audi.cn/
DAY 1
DAY 8
56 57

29. A8L GENESIS CAMPAIGN
First day: “Let there be light”
Second Day: “Divide the waters above from the waters below”
Third Day: “May the waters below be gathered together in one place and dry land appear”
Fourth Day: “Separate light from darkness to mark days, seasons, and years”
Fifth Day: “Teem (the sea) with living creatures”
Sixth Day: “Let man walk the Earth”
Seventh Day: “He saw the Audi A8L and saw that it was good”
Agency Credit: Lintas Beijing
GENESIS POSTERS
58 59

30. THE X FACTOR THE FUTURE
“The car’s STATUS is such that in Beijing
the importance of government meetings can sometimes
by gauged by counting how many A6s are parked outside”
“A lot of people bought an A6 simply because
it was, socially speaking, ACCEPTABLE”
“People would not say ‘you are showing off’ because
it was also ENDORSED by the government”
Source: dailytimespakistan 4/11, detnews 7/11 http://www.autoweek.com/article/20110711/CARNEWS/110719992&template=mobileart
Strategy 2020: Double global sales by the end of the decade.
Remain THE LE ADER in the luxury automobile category in China.
Equip all models with hybrid technology abilities.
Use R&D center based in China in order to better integrate Chinese
inspirations in designs.
“AUDI” IN CHINESE WAS DIRECTLY TR ANSL ATED PHONE T ICALLY
FROM I T S ENGL ISH NAME WHEN I T WAS FIRST INTRODUCED IN THE
1980S, AND I T ST ILL REMA INS THE SAME.
AUDI’S P OPUL ARI T Y STEMS FROM BEING THE “UNOFFICI AL”
VEHICLE OF THE CHINESE GOVERNMENT.
• FAW, THE JOINT VENTURE COMPANY, IS OWNED BY THE GOVERNMENT
• AUDIS ACCOUNT FOR 80% OF PREMIUM OFFICI AL CAR SEGMENT
60 61

31. 1994
2003 2004 2007
2008
2009
Open rep office
in Beijing
BMW Brilliance plant
built in Shenyang
3-Series and 5-Series
produced at plant
BMW China
Culture Journey
founded
BMW Warm Heart
Fund started
Announce
construction of
second production
plant in Shenyang
HISTORY
JV with Brilliiance
China Automotive
Holdings, LTD
2010
1–Series introduced
167,116 units
sold–84% increase
62 63

32. TODAY
SALES
PRODUCTION
ADVERTISING
EVENTS
CAUSE
MARKETING
Number-two-selling
luxury car brand
in China.
Third-largest market
for BMW.
Sales increase by 59.1%
to 113,169 units.
5-Series long wheelbase
plug-in hybrid unveiled
at Shanghai Auto Show.
Consistent global
messaging with the
“Pleasure of BMW/
Joy” campaign.
Use viral comaigns
to build buzz for
product launches;
e.g., Tiger launch.
China Charity
Federation BMW
Warm-Heart Fund
aids reconstruction
in disaster areas.
Official partner of
the Chinese Olympic
Committee.
BMW China Culture
Journey embraces
history of the Chinese
to better understand
consumer.
CURRENT MODELS AND PRICES
SEDANS SUV+M SERIES
MODEL PRICE MODEL PRICE
1 SERIES
Z4
$42,000$56,600
$45,500$89,800
$64,400
$166,400$182,400
$154,400$353,500
$92,000
X1
X3
X5
$56,400
$83,800
$137,800
X6 $162,300
3 SERIES
5 SERIES
6 SERIES
7 SERIES
M3
M5
M6
X5M
X6M
$164,000
$285,800
$353,500
$310,400
$336,900
http://www.bmw.com.cn/64 65

33. “JOY” OF DRIVING A BMW
Traditional campaign elements used.
Expand concepts for events relevant
to the Chinese people.
“THE BEAST” VIRAL CAMPAIGN
Launch of the M3 25th Anniversary Tiger Edition in Fall 2010.
Unbranded teaser video followed by stunt in Beijing.
Buzz built until the launch of “The Beast.”
Only 10 models were made.http://www.bmw.com.cn/66 67

34. M GL ADIATORS CAMPAIGN
Follows popular “Beast” campaign.
Launched May 25, 2011.
Microsite for teaser videos.
Great buzz around brand and campaign.
THE X FACTOR
BMW IN MANDARIN CHINESE IS “BAO MA ,”
ME ANING A PRIZED HORSE.
THE NAME RESONATES WI TH CONSUMERS
BECAUSE BOTH CHAR ACTERS EVOKE
POSITIVE IMAGERY.
68 69

35. THE FUTURE
Expand hybrid technologies in China-made vehicles
BMWi coming in 2013.
5-Series plug-in hybrid has launched, waiting for production.
Implement ActiveHybrid technology in 3-Series with plug-in model as an option.
Improve designs for the Chinese people based on cultural insight
3-Series long wheelbase in pipeline.
X1 is to be produced at the new plant.
70 71

36. 1986
2005
2006
2008 2010
Mercedes-Benz
China Ltd.
established in
Hong Kong
JV with BAIC &
DaimlerChrysler
established in
BBDC in Beijing
Headquarters
moves to Beijing
C-Class joins local
production and
S-Class introduced
to Chinese market
147,670 units sold
—115% increase
YOY
Launch E-Class
long wheelbase
and begin
productio in China
HISTORY
E-Class begins
production in
China
TODAY
SALES
PRODUCTION
ADVERTISING
PUBLIC
REL ATIONS
160 dealerships to
expand by at least 30
in 2011.
Third-largest market for
Mercedes-Benz sales.
92,000 units sold in the
first half of 2011.
2.9 billion-dollar
investment with the
BAIC for a new engine
plant and new R&D
center (production to
start by 2013).
New design center
opened in Beijing
July 2011.
Consistent with global
branding and company
values.
Emphasizes social
responsibilities.
Kobe Bryant as
spokesperson for smart car.
Li Na, winner of French
Open, as first Chinese Global
Brand Ambassador.
Focus on five areas: Fashion,
corporate responsibility, golf,
motor sports, and heritage.
Partnership and China
Fashion Week.
Mercedes-Benz arena
in Shanghai.
Music Festival with National
Center for Performing Arts.
Test-drive and hotspot display.
72 73

37. CURRENT MODELS AND PRICES
SEDANS SUVS & AMG
MODEL PRICE MODEL PRICE
A CLASS
S CLASS
$36,600$42,700
$49,000$55,000
$71,500$113,500
C AMG $153,500$205,800
$261,000
$347,300
B CLASS
C CLASS
CLS CLASS
E CLASS
(Long wheelbase
most popular)
$245,800
$558,100
SL CLASS
SLK CLASS
$47,300$78,100
$143,000$399,600
$184,300$307,300
$92,000$132,400
$143,000$399,600
CLS AMG
G CLASS
G55 AMG
GL 450
GLK CLASS
M CLASS
ML 63 AMG
R CLASS
S65L AMG
SL63 AMG
SLK55 AMG
SLS AMG
MODEL PRICE
$281,000
$68,900$112,000
$119,600$218,000
$301,200
$107,300$192,000
$507,000
$395,000
$199,800
ACL ASS NOVEMBER, 2010
Supported by microsite: www.areyouready.com.
Focused on achieving your DREAMS
and never settling.
Used real people and their PASSIONS.
http://www.mercedes-benz.com.cn/content/china/mps_china_website/enng/home_mpc/passengercars/home/new_cars/models.flash.html74 75

38. THE X FACTOR
THE TR ANSL AT ION OF MERCEDESBENZ USUALLY CUT S
MERCEDES OUT AND JUST LE AVES BENZ WHICH IS CALLED
(PRONOUNCED AS: BEN CHI), ME ANING TO MOVE SWIF TLY
THE FUTURE
New joint venture approved March 2011
Daimler and BYD maintain Shenzhen BYD Daimler New Technology Co. Ltd
for the development of an electric vehicle for the Chinese market.
Expand presence in premium compact segment
A & B Class compacts for 2013 availability.
Goal of 300,000 units sold annually by 2015
76 77

39. 1993
2004 2005 2008 2010
Lexus imports
to China begin
Plan exclusive
dealerships in
Beijing, Shanghai,
Guangzhou, and
Shenzhou
Third-annual Taste
of Lexus Personal
Touch
Added IS 250
Sedan & IS 250C
Convertible models
with 2.5L engines
49,000 units
sold— 61% sales
increase
HISTORY
First Lexus
dedicated
showrooms open
2009
Firstworldwide
launch in China for
GX460 (SUV)
78 79

40. TODAY
SALES
PRODUCTION
ADVERTISING
EVENTSFourth in the luxury car
market in China.
Taxes on imports have
significant impact on
price and overall sales.
As of 2009, sold 20% of
Audi brand and a third
of Mercedes-Benz.
Launched first full
hybrid luxury compact
hatchback, CT200h.
Showcase 12 luxury
models at annual auto
shows.
Emphasize alternative
fuel options.
“Pursuit of Perfection”
used since 2007.
Increased awareness with
appearance at Chinese
auto shows for new model
launches.
Taste of Lexus—Personal
Touch offers consumers
opportunity to test-drive new
long wheelbase models.
CURRENT MODELS AND PRICES
SEDANS SUV+HYBRIDS
MODEL PRICE MODEL PRICE
IS $56,700$99,200
$101,800
$215,000
RX450h $146,700
$144,700
$318,900
RX $76,100
GX
LX
$178,400
$253,000
ES
GS
LS
$60,000 GS450h
LS600hL
http://www.lexus.com.cn/80 81

41. PRINT THE X FACTOR
LEXUS IN CHINESE IS AND DIRECT PHONE T IC TR ANSL AT ION
“LEIKESASI,” BUT THE BR AND GOES BY I T S NICKNAME “L INGZHI” OR
“PURE WILL /DE TERMINAT ION.”
TOYOTA NEEDS TO UNDERSTAND WHY LEXUS CUSTOMER SERVICE IS SO
SUCCESSFUL IN THE U.S . VS . CHINA
IMPLEMENTED T WO CHINESE BR AND MANAGERS IN THE U.S .
TO ANALY ZE HOW LEXUS’ SALES FUNCT IONS CAN TR ANSL ATE
TO THE CHINESE CULTURE.
NEED TO DIFFERENT I ATE.
TOYOTA SEEMS TO BE REFUSING TO BUILD A LEXUS PL ANT IN CHINA
DESPI TE TA XES ON IMP ORT S .
http://www.businessweek.com./magazine/content/11_14/b4222032202135.htm82 83

42. IMPLICATIONSTHE FUTURE
Continue Toyota’s plan to own the green segment in automobiles
“GREEN ENVISION THE FUTURE”
“DARK SIDE OF GREEN” to launch CT200h.
Focus on environmental issues and alternative energy options (vehicle options
to expand quickly).
More long-wheelbase models over time, including LS660hL.
84 85

43. AUDI, BMW, AND MERCEDESBENZ penetrated the Chinese
auto market with Chinese business partnerships.
Without the added support and leverage, cost is high and brand awareness is harder to gain.
Taxes on imports hurt high volume sales
e.g., Lexus imports have:
24% custom duty tax
17% value-added tax
Consumption tax based on engine up to 40%.
THE LEADING LUXURY CAR BRANDS DEPEND
ON JOINT VENTURES FOR SUCCESS
The DESIGN of Chinese vehicles relates to THE CULTURE:
Speaks to the way Chinese people behave, where the outside is soft and
pragmatic but the inside is fired up by ambition.
Uses Chinese designers to better incorporate desires
Long-wheelbase vehicles.
Provides more legroom for passengers, given most luxury car owners have chauffeurs.
Curvy outer skeleton
Resembles Chinese caricature.
Trend with opening R&D centers in major Chinese cities: two opened in July 2011.
CHINESEFOCUSED DESIGNS ARE
KEY TO RESONATE WITH THE AUDIENCE
86 87

44. CONSISTENT GLOBAL MESSAGING DEMONSTRATES A
STRONG AND INTERNATIONALLYRECOGNIZED BRAND
The TOPSELLING brands have one consistent message around the globe
Specific L ANGUAGE and IMAGERY are tailored for the
Chinese people, but the overarching concept is identical
Proves a brand’s position in the market
Chinese people VALUE A BRAND with international
clout—and consistent messaging creates this THANK YOU
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