Emerging, mature, or somewhere in between?
Two or three years ago it was still quite easy to agree upon the state of the Chinese passenger car market: an emerging market with enormous growth potential. Today, most people would still agree to the existence of the enormous growth potential, but is the Chinese car market still emerging?
Several market characteristics would lead us to think so. The considerable market growth experienced in China is primarily driven by car sales to people who have previously never owned a car. These customers, purchasing a passenger vehicle for the very first time in their life, represent 70% among all new car owners in the country. Almost by consequence, the level of consumer experience with cars is comparably low. More than 60% of new car buyers rely heavily on advice from friends or family members, and base their decision making importantly on recommendations.
Another indication that China is still an emerging market lies in the fact that at present more than 90% of all car buyers are paying for their newly purchased vehicles by cash. Despite the offering of finance packages by some vehicle manufacturers, car financing has not yet become widely accepted.
The development of China’s new car market is driven by young, successful professionals who have achieved a solid financial situation with good spending power for consumable goods. This young generation, often returning from several years of education abroad, is increasingly adopting a more Western lifestyle, where flamboyance and personal pleasure are more generally accepted concepts in comparison to the traditional Chinese values, focused on modesty and discretion for example.
This is why in China as in the more developed markets, a car not only serves as a means of transportation but also allows its owner to portray an image, which becomes a means of pleasure. As we can observe in the recent Brand Health and Needs Segmentation Study conducted by TNS Automotive, young Chinese car owners in particular represent a joyful and freedom-oriented consumer group, attracted by modern and trendy vehicles. The development of this profile in turn has created a fun and adventure-oriented clientele which has substantially increased over recent years. This fact alone has established a compelling basis for the introduction of a diverse range of new car models, whereby hatchback styled vehicles and SUV offerings enhance their presence vis-à-vis the historically predominant sedan cars.
As this year comes to an end, it is clear that the new passenger vehicle sales figures will exceed the much expected 5 million mark and 2007 will be another record year for the Chinese auto industry. Present and future market opportunities have attracted virtually all car manufacturers to this market, and made China the most crowded market place with far more than 50 brands and almost countless models on offer.
With rapidly developing consumer needs and behaviours, can the most competitive auto market in the world still be considered emerging? I don’t believe so. But is it already a mature market? Not yet! Certainly fast developing… How would you describe the state of today’s Chinese car market? When will it actually reach mature market stage? How will the mature car market in China differ from the current developed markets around the world?
Interesting article. Any idea on where I can get more information on this?
Posted by: Car Loans | June 16, 2008 at 05:10 PM