By Kenneth Rapoza, Contributor

Within seven years, China will outstrip the United States to become the world’s leading market for premium cars.  It already beat the U.S. for top auto market in general in 2009. The Organisation for Economic Development and Cooperation said last week that China would overtake the U.S. as the world’s leading economy by 2016.  No doubt about it, when it comes to being big: China is fast becoming the new biggest. Niche auto markets are no different. On the luxury end, China drivers are going to be starting soon from the pole position. “In the U.S. auto market, the American version of luxury is a little different than the Chinese,” says Hans Werner Kaas, a 22 year veteran of McKinsey & Company.  He leads their U.S. auto practice in Detroit.  “If you have a fully equipped Ford Explorer with all the bells and whistles, you’ve got a luxury vehicle.” Around 14% of the cars sold in the U.S. are considered to be premium vehicles. In China last year it was around 9%. “The luxury segment in China is dominated by the traditional German high-end car makers. It’s Mercedes Benz, BMW and Audi on the roads in Shanghai,” says McKinsey partner Sha Sha in Shanghai. Where’s this market heading? With under 10% penetration, it has at least 40% upside before it comes close to the U.S. today. By 2020, China will be selling around three million luxury cars while the U.S. will be selling around 2.3 million, according to a McKinsey report published last month. In the 16 page report, written by Sha Sha and two colleagues, their Asian automotive practice forecast China’s premium car market to grow at an annual rate of 12% over the next seven, compared with 8% for the overall passenger car market there. China‘s total luxury auto market will equal that of all of Western Europe by then. In fact, if all goes swimmingly well with China‘s 12th Five Year Plan — no hard landings, no economic turmoil pulling the rug out from under China in Europe and U.S. — then China could just as well overtake the United States as the largest premium car market in three years. Trading Up China‘s young professionals are earning more than their parents ever dreamed of. They grew up frugal, mainly out of necessity. But now they have extra money to spend.  The one child policy means Chinese families have more money to pass down to their young children. The roads they drive on may be crowded in cities like Beijing, and the roads full of potholes in second and third tier cities, but Chinese consumers are giving up their bikes for cars. As incomes rise, they are giving up their Buicks — the most popular American vehicle sold in the country — for Land Rovers, Jags and German luxury.  Premium cars accounted for just 24,000 units in 2000 and over a million in 2012. At a time when the luxury vehicle market is stalling in the U.S. and Europe, China is becoming …read more
Source: FULL ARTICLE at Forbes Latest