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At Shanghai Auto Show, brands balance green push and SUV demand

China's government wants more electric vehicles (EV) on the roads but consumers remain hungry for sports utility vehicles (SUVs), forcing foreign automakers to get innovative with their offerings.

Late last year, the mainland proposed automakers should make new energy vehicles account for 8 percent of total car fleets by 2018 despite booming demand for SUVs — first-quarter SUV sales rose 21 percent on-year to 2.4 million, according to data from the Associated Press.

At this year's Shanghai Auto Show, global brands were eager to show their adherence to Beijing's calls, while still catering to customers of the world's largest car market.

Jaguar Land Rover showcased its first all-electric SUV on Wednesday, Audi debuted its electric SUV-coupe, the E-tron Sportback, and PSA Group unveiled its Citroen C5 Aircross, a SUV with two electric motors.

Growth in SUV segments and new energy vehicles, especially electric cars, can help the Chinese car market expand 8 percent per year, Francois Provost, senior vice president and Asia-Pacific chairman at Renault, told CNBC on the sidelines of the show.

"There is a clear regulation by the Chinese government ... so the whole automotive industry is moving towards the petrol-electric vehicle."

Wednesday saw Renault premiere the RS2027 concept car, a model with electric motors that the firm hopes will be the future of Formula One race design.

Jaguar CEO Ralf Speth meanwhile told CNBC the luxury brand was focused on refining internal combustion engines, both diesel and petrol, as well as simultaneously preparing for electrification.

"This is an unbelievable time of change in the auto industry," the German executive said.

The new Mercedes S class S680 at an event ahead of the 17th Shanghai International Automobile Industry Exhibition in Shanghai on April 18, 2017.
JOHANNES EISELE/AFP/Getty Images
The new Mercedes S class S680 at an event ahead of the 17th Shanghai International Automobile Industry Exhibition in Shanghai on April 18, 2017.

Fellow luxury carmaker McLaren, known for high performance cars such as the new 720S model that debuted in China on Wednesday, is planning to expand its range of electric products over the long-term.

"We need to respond to legislation changes on emissions ... Towards the end of the decade, we will introduce hybrid cars across the range. By 2022, more than 50 percent of our cars will be hybrid," CEO Mike Flewitt told CNBC. However, one major challenge will be ensuring the firm's hybrid offerings are of compatible weight to its existing range of sports cars, Flewitt continued.

Aston Martin, James Bond's car brand of choice, aims to lead the luxury EV sector and has teamed up with Beijing-based technology company LeEco to develop an electric sedan, the Aston Martin RapidE, which is expected to hit markets in 2019, CEO Andy Palmer told CNBC.

More than 1,000 companies showed off their wares at the biennial Shanghai Auto Show —testament to the power of mainland consumers and the industry's cut-throat nature.

"The Chinese market is becoming more competitive. From July 2015, there have been significant price wars that put enormous pressure on profitability of operations," explained Carlos Tavares, chairman of PSA Group. Transaction prices, or what customers are paying at dealerships, went down by 10 points, he continued.