SHANGHAI -- Ten years ago, many Chinese families could not afford a car. Today, not only can they afford one, but they're getting picky about which vehicle to buy.
SUVs, with their high seating position and wide view of the road, have won the hearts of Chinese consumers. Within the segment, compact models are the big sellers because they are less expensive and easier to maneuver on China's congested urban streets.
China's three top-selling SUVs -- the Great Wall Haval H6, Volkswagen Tiguan and Honda CR-V -- are compacts. In fact, nine of the 10 top-selling SUVs in China last year were compacts.
China's annual light-vehicle sales are growing 10 to 15 percent a year, down from more than 30 percent in 2009 and 2010. Yet SUV sales continue to soar more than 40 percent each year.
Automakers want to make hay while the sun still shines. When the Beijing auto show opens on April 20, visitors will see an array of compact SUVs.
Three international players have announced plans to unveil compact SUVs in Beijing. General Motors will launch the Chevrolet Trax, Lexus will introduce the NX, and Honda Motor Co. will unveil an as-yet unnamed model.
Peugeot, Citroen, Skoda, Land Rover and Jeep also are expected to showcase compact SUVs.
Someday, this segment will be oversaturated, but it hasn't happened yet. Last year, Ford Motor Co.'s China sales surged 49 percent to 936,000 units. Two locally built SUVs, the Ford Kuga and Ford EcoSport, generated 17 percent of those sales.
Likewise, PSA/Peugeot-Citroen enjoyed healthy demand for the Peugeot 3008, which was launched in 2013. Thanks to the 3008 and other new models, PSA increased sales 25 percent last year to 550,000 units.
For global automakers, compact SUVs are moneymakers. For domestic Chinese brands, the segment could mean survival.
Domestic automakers are quickly losing market share to foreign rivals armed with better technology. In the first two months of this year, the market share of Chinese brands plunged 4.8 percentage points to 38.4 percent.
If those losses persist much longer, China's domestic automakers may find themselves caught in a downward spiral, unable to invest in new products as revenues dwindle.
Unable to wage a frontal counterattack in China's huge compact sedan market -- where many of the losses have occurred -- domestic automakers are trimming sedan output to shift more resources into compact SUVs.
Jianghuai Automobile Co. exemplifies this strategy. In the first three months of this year, JAC expanded its compact SUV output 19 percent while slashing sedan output 54 percent.
Great Wall Motor Co., mainly a compact SUV maker, also pared sedan production to shore up its SUV lineup. It comes as no surprise that Great Wall will debut its Haval H2 compact SUV in Beijing.
To date, no other Chinese automakers have disclosed models to be displayed in Beijing. But Chinese media are reporting that nearly every company will showcase a new SUV.
Chinese automakers traditionally compete with their global peers by undercutting their prices. But now, global brands are offering compact SUVs for 100,000 to 200,000 yuan ($16,100 to $32,200). For many Chinese households, those prices are affordable.
As a result, Chinese automakers are striving to improve their product quality by sourcing more parts from global suppliers. It's their only hope to compete with foreign rivals.
So the Beijing auto show should be a lively event as foreign automakers seek to cash in on China's booming SUV market, while Chinese automakers battle for survival.