Marketing Automotive

100 automakers are still operating in China. The key priority set by the Chinese government is consolidation. The government has identified the eight top companies and encourages them to consolidate through mergers and acquisitions. This trend is going to accelerate but is based on each company’s own initiative.

The second trend is that domestic brands are gaining market share and reach between 30 to 35 percent of the total sales. The gap in quality with foreign brands is decreasing quite fast. It is expected that between 2015 and 1018 the quality will be improved in such a way that the gap will be eliminated. If the domestic brands keep their cost advantage while improving quality, their market share will continue to grow.

The third trend is the rise of new energy vehicles. The number of electric vehicles is growing fast. This is the case not only for light-duty vehicles but also for passenger cars. Electric taxis are operating already in big cities. The objective is to reach 5 % electric vehicles by 2015 (roughly 150.000 units).

After having conquered the main cities, the automobiles are now ready to go to third-tier cities. Today, 230 million Chinese families can afford a car and this is still a low car ownership rate (around 50 to 60 cars per 1000 people). But, may be more important, the Chinese car industry will get global and start to sell in the US and Europe.

Pollution in big cities is a main concern. Therefore many efforts will be done to improve the efficiency of the current conventional models. They will have smaller and better engines. Better transmissions and lighter material.

Another important concern is the dependence on imports and the need to buy abroad energy, steel, iron and rubber.

The need for human talent remains High. China has still difficulties in getting really qualified engineering talent as well as management talent. China is trying to do many things, to build many factories, to develop many new products, to have global companies but the shortage of human talent is the biggest problem to overcome. This means that for many years to come partnerships with American and European companies will be the way to success.

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Automakers seeking to enhance their position in China could benefit from adapting media plans, determining precise strategies by the age, gender and location of consumers.

Volkswagen, MediaCom and Millward Brown joined forces to survey 6,682 people in 17 urban centres across the country. Respondents had either bought a new car during the last two years or intended to do so in the coming 24 months. The results showed the sustained economic growth and rising affluence experienced by Chinese shoppers have encouraged a “new set of expectations” manufacturers must consider.

“Their life choices – including which brand of car they drive or would like to drive – are becoming more varied,” the report said. “At the same time, the media landscape through which they receive their commercial messages and brand recommendations has become more complex, more fragmented and more social.”

Digital channels exert a major impact at all stages of the purchase funnel, from building awareness to “creating a positive disposition” and “setting their behaviour intent”. However, traditional media retains a vital status, both because TV boasts unparalleled penetration, especially in lower tier areas, and as radio has a unique role in providing traffic updates.

“Digital is not the sole  medium and needs to be used in conjunction with other messages,” . “Other media are very well placed to reach key target groups.” the study said.

The analysis divided the panel into four distinct categories offering clear opportunities for automakers.

The first, young drivers, is comprised of individuals aged between 20 and 30 years old, and made 27.6% of Chinese car purchases in 2010, a figure that climbed in Tier 1 cities like Shanghai and Beijing. Online chat and social networking are among the primary media activities pursued by this community, who usually work long hours and thus employ “virtual tools” for various purposes. “Every aspect of car brand communications such as brochures needs to be digitised for this audience,” the study said.

Another core constituency is women, currently claiming over 25% of new registrations, suggesting a generation of confident, financially successful and independent female shoppers are in the ascendancy. “Word of mouth is particularly important for women so bloggers and social media are crucial channels ». “Women also read auto magazines in a different way from men. They focus less on numbers, more on the images and prefer shorter articles.”

Wealthy households offer equally substantial prospects for luxury marques, with radio and the mobile web integral to reaching this demographic. “Car brands need a premium image to be considered but one key change has been the evolution of a significant group that have become wary about showing off,” the report said.

Finally, Tier 2 cities are delivering a surge in demand, and as residents of these regions typically possess a more “relaxed lifestyle” and “conventional media diet”, TV remains an essential medium here.

Paul Hu, head of Volkswagen brand marketing in China, said that consumers insights “help cut through the ever-growing clutter in the media environment.” “As the number one automobile company in China, Volkswagen needs the best possible understanding of automobile consumers,” he added.

Geely, a Chinese automaker, is to sell vehicles through e-Commerce portal Taobao, in an online retail deal. The firm will sell its Gleagle cars on the website, with the Geely Gleagle Panda, a compact model, to go on sale from December 22. A special-edition Panda will be available via the portal under a group-buying system, whereby a certain number of buyers have to sign up in order to pay a reduced price.

The initiative reportedly makes Geely the first automaker to set up a permanent sales operation on Taobao.

China now has the world’s largest internet market, with over 420m users, and its e-Commerce operations are expanding rapidly. Chinese car sales passed those of the US for the first time in 2009.

Mercedes-Benz turned to Taobao in September to sell 205 Smart Fortwo cars at a 23% discount using a group-buying system. The models sold out within three hours.

Geely’s Taobao presence offers information on the cars plus an ordering system. Buyers must pay a small deposit of 288 yuan ($43, €32) on Taobao, with purchases to be completed at a local showroom.
e-Commerce could represent an increasingly attractive channel for cost-conscious automakers.

There are many things you should know about this booming market.

It is the biggest world market. In 2009, 13,6 million cars were sold in the Empire of the Middle. It is expected that 2010 will finish with more than 17 million sales.

The n°1 brand is Volkswagen with 1,4 million cars in 2009. What’s more amazing is that the brand sold twice the number compared to its national German market.

Local brands represent only 29 % of the total car market.

The hit model was the F3 sold by BYD with 291.000 units at an average price of 6.400 euro (290.000 yuan). BYD concentrates its efforts on the electric car market It looks as if BYD has the best battery technology available to-day. Do you know that the BYD brand stands for “Build Your Dreams”?

The Chinese Government has put the objective of 40 % for Chinese brands to be reached in 2011. The biggest challenge will be to over bridge the quality gap but trends are encouraging.

Today, 10 Chinese car manufacturers are on the market. It is expected that after a consolidation period 3 to 4 will remain. The winners will need to build at least 2 million units a year.

It is expected that 200 million vehicles will be on the roads and streets by 2020.

JD Power, the consultancy company (*), assessed the views of 11,678 people who had bought a new vehicle from 52 carmakers since February 2008. More specifically, it asked respondents to use a 1,000-point scale to rate their experience during and after the purchase process.

Chevrolet, which is run by Shanghai General Motors – a joint venture formed by GM and a local partner – claimed top spot in the rankings on 875 points. Guangqi Honda took second on 874 points, ahead of Dongfeng Honda in third on 871 points, indicating the overall strength of the Japanese firm. Roewe was the leading domestic marque on 869 points, and had climbed from sixteenth position in the same survey last year. Dongfeng Peugeot completed the top five and confirmed the dominance of foreign enterprises in China. All of these manufacturers generated improvements on each the metrics tracked by JD Power, which included the quality of the advice customers received and the facilities provided.

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