Small is beautiful for Audi in China

By Norihiko Shirouzu

SHANGHAI (Reuters) - German carmaker Audi AG sees compact cars increasingly becoming the main driver of sales in China, as the country's booming middle class looks for more affordable luxury, the firm's China president Dietmar Voggenreiter said on Monday.

Smaller luxury cars are a big volume driver for Audi - the profit engine for Volkswagen AG - and other premium carmakers, all of whom are keen to boost their presence in China, the world's largest car market.

Foreign automakers continue to plough money into factories in China even as the biggest economic slowdown in a quarter of a century crimps sales growth.

Voggenreiter said Audi is seeing stronger growth in the "lower segments" of Chinese consumers' luxury spending, driving the shift from larger cars to smaller models, which he said would be "the key growth drivers" in the China market.

"That means mid-class cars - for us, that's the A4 and the Q5 - and compact segment cars will grow in the future very fast. These are the fastest growing segments," he said at a roundtable event at the Shanghai autoshow on Monday.

He added the balance between smaller and larger cars would tilt towards levels in more mature auto markets like the United States, where smaller cars account for around 65 percent of the total. Larger premium sedans account for 45 percent of sales in China now, with smaller cars making up 55 percent.

Voggenreiter said China's luxury car market has plenty of room for growth and would outstrip the wider sector. Luxury car sales in China account for around 9 percent of total sales, compared to 13-15 percent in more mature markets, he noted.

(Reporting by Norihiko Shirouzu; Writing by Adam Jourdan; Editing by Ian Geoghegan)