The Chinese auto market is not only the world’s largest, but it is also the world’s most competitive, according to a new survey. New-vehicle shoppers in China enjoy the widest range of choices, with 94 brands and 471 models available, which is responsible for a notably high level of cross-shopping.
New-vehicle shoppers in the Chinese auto market, on average, visit three different brands before purchasing their vehicle. The proportion of new-vehicle buyers who cross-shop multiple models before purchasing a vehicle has increased to 60% in 2011 from 50% in 2007. In comparison, only 24% of new-vehicle shoppers in India cite considering more than one model before they purchased a vehicle.
J.D. Power, the China survey’s source, doesn’t conduct the equivalent survey in the U.S., so comparisons are inexact. However, from the Power U.S. Sales Satisfaction Study, it’s known that 79% of new-vehicle buyers use the Internet to cross-shop models, compare specs and prices. Once they do start to venture out to the dealership, 60% of new-vehicle buyers visit more than one dealership before buying or leasing their new vehicle.
Price is the number one reason for vehicle rejection, with 15% of shoppers rejecting a vehicle model because the total price is too high, according to “The 2011 China Escaped Shopper Study,” from J.D. Power Asia Pacific.
However, in Chinese auto market the perceived value of the vehicle model, rather than affordability, is the primary cause for rejection. Only one in five (22%) shoppers in China who reject due to price cite they cannot afford a particular vehicle model. Nearly one-half (47%) of “price rejecters” indicate that the price is more than what they would pay for any vehicle. In addition, 31% of price rejecters say they rejected a model because it offers less value for the money, compared with other models or brands.
Dissatisfaction with the vehicle’s exterior design is the second largest rejection reason in the Chinese auto market. Localizing exterior vehicle design to appeal to shoppers in various regions of China is an ongoing challenge for European brands, particularly French brands, according to Power. (Buick’s success in China is due in part to GM favoring Chinese design cues over U.S. ones in new vehicle design. And in fact Buick only survived the GM bankruptcy because of its Chinese sales. I expect the Chinese influence at all global brands to grow given the increasing size of the market.)
Fuel economy is also among the top rejection reasons, particularly given the sharp increases in gas prices that have occurred in recent years. Fuel economy is becoming a challenge for nearly all manufacturers in China, but particularly so for U.S. brands. Approximately one in four Chinese rejecters (24%) say they rejected a model of a U.S. brand because they expected better fuel economy.
Other often-cited reasons for rejection include long delivery time and concerns about reliability. Approximately 12% of rejecters say they rejected a model from a German brand because delivery would take too long. Concern about reliability is the main reason for shoppers to reject a Chinese domestic brand model, with more than 10% of shoppers rejecting a domestic model due to concerns about reliability.
“To win customers’ minds and wallets, increased marketing investments are needed to build up strong brand relationships,” said Dr. Mei Songlin, general manager of research services, J.D. Power Asia Pacific, Shanghai. “Effective communications at the dealership level are also required to influence shoppers’ choices during the purchase process.”
The 2011 China Escaped Shopper Study is based on responses from 11,496 new-vehicle owners who purchased their vehicle between August 2010 and March 2011.
