Automakers betting on bigger cars after one-child policy relaxed in China

A Volkswagen MPV on display at a car exhibition in Guangzhou. PHOTO: BLOOMBERG

GUANGZHOU (REUTERS) - Automakers are betting that Chinese families will embrace the mini-van, hoping the larger, unsexy sibling of the bestselling SUV will become the next big thing just as Beijing relaxes the one-child policy.

Mini-vans, or multi-purpose vehicles (MPVs), were front and centre at the Guangzhou auto show, where Volkswagen AG presented a supersized version of its Touran and Guangzhou Automobile Group subsidiary GAC Motor showcased a prototype mini-van. The show ended on Sunday (Nov 29).

These seven-seaters currently account for just 10 per cent of passenger car sales in China, but sales are growing at a faster pace than the entire auto market, the world's largest.

Industry experts say the appetite for bigger cars is strong enough in China, where extended families often live under one roof, to potentially turn it into the largest MPV market after the United States, where automakers have sold big cars to families for years.

At the end of October, China further relaxed its one-child policy, a move which experts said would not necessarily lead to a sudden increase in the size of the average family. But the Chinese authorities hope it will help boost the population to 1.45 billion by 2030 from 1.37 billion at the end of last year.

"After the roll out of the two-child policy, I believe the market share of seven-seat SUVs and MPVs will further strengthen," Mr Wu Song, GAC Motor's general manager, told Reuters.

MPV sales for the first 10 months of the year grew 7.8 per cent, according to the China Association of Automobile Manufacturers, outperforming the 1.5 per cent growth in the overall car market.

The focus on Chinese families is relatively new for MPV makers which for years targeted companies seeking large, luxurious models for executives or small businesses that need a workhorse to haul goods and staff.

Many households include at least one set of grandparents, as they play a key role in childcare.

These extended families, coupled with restrictions in most major cities on owning a second car, give MPVs an advantage over the five-seat sports utility vehicles (SUVs) that currently account for the bulk of passenger car sales growth. "The cost of owning two vehicles is high.

That is why demand for seven-seat vehicles has grown greatly," said Mr Gustavo Cespedes, executive vice-president of General Motor's joint venture with SAIC Motor and Wuling Motor which makes China's best selling MPVs.

GM and its partners account for more than half of all MPV sales. The top seller is the Wuling Hongguang, a utilitarian mini van that starts at 42,800 yuan (S$9,475), but the more family friendly Baojun 730, which starts at 69,800 yuan, became the second most popular MPV just one year after it was launched.

Spurred by the rapid success of the Baojun, rival Geely Automobile Holdings is designing a mini-van for families, a person familiar with the matter said.

A company spokesman said it was too early to discuss future products.

GAC Motor also sees opportunity in families.

Design director Zhang Fan said GAC started working on a car two years ago to fill the gap between basic mini-vans and high-end models such as Toyota Motor Corp's Alphard, which starts at 759,000 yuan. "That gap is actually quite lucrative," he added.

The rising popularity of the lumbering MPV shows that more Chinese consumers are becoming savvy and choosing cars that meet their needs, and not because of the status they confer.

Mr Ma Li, a plastic surgeon in Beijing, bought an MPV because he said its sliding doors were safer for his 10-year-old son.

"I didn't think at all how my friends would view this car," headded. "The important consideration was practical use."

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