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China’s economic growth has led
to massive expansion across all
consumer categories as its citizens
become more affluent, and, in many cases,
have discretionary income for the first time.
But one sector stands out for growth even
in China: automobile sales. Over the past
five years, China was the only country in the
world to achieve annual growth of more than
20%, and in 2010 alone, car sales will likely
grow by 23%, according to Nielsen estimates.
The big story, however, is not the size of
that growth—sales of cars will consistently
increase for the next few years—but where
that growth is coming from: China’s lower tier
cities. These and other issues facing China’s
automotive industry were addressed today
by a range of speakers at the Nielsen China
Forum.
Shirley Ng, Director, Client Leaders,
Automotive, The Nielsen Company, China,
spoke of the challenges and opportunities
for car manufacturers and retailers. “Private
vehicle ownership is still low in China and
we expect that the number of first-time
car buyers will increase sharply in the
next few years. Car owners in first tier
cities like Shanghai are starting to trade
up—good news for luxury models. But the
real opportunity is in the tier two, three and
four cities such as Shandong, Fujian and
Guangdong, where the middle class is
growing every year and their confidence as
consumers has been rising faster than in tier
one cities.”
Ng said manufacturers and retailers
must understand the differences between
the needs of consumers in lower tier cities
compared with those in tier one cities, and
noted that advertisers must approach these
price sensitive car buyers creatively by
focusing on brand building for the long-term.
To better understand these new car
consumers, Georgia Zhuang, Director,
Consumer Research, The Nielsen Company,
China, provided an in-depth look at this group
and the factors and themes that drive their
purchase decisions. Lower tier consumers
tend to be older than those in tier one, and
their families are their top priority. Work is
viewed as a way to increase their family’s
quality of life and they tend to have fewer
financial pressures. In short, they have
positive outlooks on life and are confident
about their futures.
Auto manufacturers and retailers need to
market toward these consumers by finding
Auto Industry
Chinese Auto
Industry Racing
Forward
New opportunities for long-term growth
come from lower tier cities
the emotional linkage with their priorities
and satisfying their basic needs. Zhuang
noted that companies focusing on lower
tier consumers would do well to emphasize
fundamental themes such as economical,
durable, safe, reliable, simple and plain
exterior to consumers. It’s also necessary to
build a trustworthy brand image that offers
high value.
Since these consumers have little
experience with or knowledge about cars
(90% are first-time buyers) and have limited
information, their purchase decision making is
relatively simpler and quicker. Manufacturers
and retailers should use a range of media
including the Internet and social media as
well as physical displays at various locations.
Dealer network expansion and training of
the sales and service associates will further
enhance brand visibility and reputation—key
factors important to lower tier consumers.
Mirroring the growth in car sales in China
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has been advertising spending. From 2009-
2010, the auto industry posted the highest
growth in spending of any industry, up 24
percent and indicative of the increased level
of competition between manufacturers.
But that high level of spending has led to
decreased efficiency in mature markets
whereas lower spending in lower tier markets
has yielded strong results.
Given this marketing environment,
Kenneth Tan, Associate Director, Analytical
Consulting, The Nielsen Company, said
that car makers need to focus on long-term
growth by consistently advertising to build
brand equity. “Marketing helps build market
share in the near-term, but also helps grow
brand Equity in the longer term. Without
incremental activities to bring in new buyers
and respond to competitive activities, brand
equity will erode. ”Based on Nielsen research,
Tan noted that up to 35 percent of total auto
sales are based primarily on brand equity.
January 2011 Link
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