Who could have imagined? Ten years ago, the only automobiles seen on the streets of coastal cities were non-descript black sedans and shoddy Volkswagen Jetta taxis. Today, China's highways are overflowing with cars of every shape, size and color. While foreign brands still dominate the market -- with many produced on the mainland -- local manufacturers such as Geely are coming on strong, particularly in lower-tier markets. Throughout the Middle Kingdom, approximately 20 million passenger cars are sold every year. In Beijing, one household out of three has bought an automobile.
Auto ownership, perhaps not unexpectedly but still remarkably, has become a rite of passage into the hallowed ranks of the middle class. Although a home mortgage is still the sine qua non of landing a wife, Chinese men face a new imperative: you can't say you've made it unless you have a car. (A slick smartphone - hello, iPhone! -- ranks third on the list of "badged necessities.")
China: Not Car Friendly? The ardor of China's love affair with cars was not statistically ordained. In many respects, the country is not car-friendly. Ultra-aggressive Kamikaze drivers are a pervasive menace. Import tariffs are prohibitive. By developed market standards, incomes are pinched; buyers spend approximately 120% of (declared) yearly income on their first vehicle, versus ratios of 30%-40% in the West. (Most enter the market when salary passes the 10,000 RMB-per-month threshold, or approximately $45,000 per year on a purchase power parity basis.) In Tier I cities, plate fees cost an additional $5,000. Cars are not a necessity; in a land of single children, there are no soccer moms. The subway and pubic transportation system is increasingly robust; Shanghai's metro is now the most expansive in the world. And, what's more, maintaining a car is a hassle. Parking spaces are far and few in between. Highways are choked with bumper-to-bumper traffic. Even car washes are rare.
Still, people buy. The question is, "Why?"
Status is King. Of course, "convenience" is a key factor. More professionals, driven by rising real estate prices, are buying homes far from city centers, so automobiles can be practical. But functional needs drive purchase of local brands. The spectacular growth of brands commanding price premiums is underpinned by a basic Chinese instinct: an unquenchable thirst for status. China's "unifying conflict," the tension between upward ambition and hierarchical regimentation, mandates members of the new elite proclaim their position on a ladder of success. Cars are ideal "status projectors," given their large out-of-pocket expense and inherent conspicuity. (More subtly, the driving experience -- a surge of forward momentum -- delivers an elusive sense of "control.") In a country obsessed with "face," the currency of forward advancement, cars are also "investments" in the future. They generate respect. They open doors.
The need to project king-of-the-jungle authority explains why auto benefits are "externalized"; cars are positioned, directly or indirectly, as vessels of professional progression. The visceral thrill of sports cars is a secondary urge. Mazda's "Zoom Zoom!" campaign has been adulterated to incorporate public admiration cues. Even BMW, known in the West as a "driving machine," has fused Western "internal satisfaction" with a quintessentially Chinese "more room to grow" payoff. Audi 8 appeals to men who are "masters" of the commercial landscape or "connoisseurs" of true quality. Even lower-priced cars resort to identity affirmation or social standing reinforcement. Ford Fiesta appeals to post-80s types who were "born bold, born sexy." Mid-tier Volkswagen Passat employs spokesman Jiang Wen, an iconic film director, who declares, "The powerful can change a generation."
The instinct to project status also accounts for some of the market's more peculiar characteristics. Cars here are huge. SUVs such as Honda's CRV, BMW's X3 and X5, and Audi's Q5 and Q7 are popular despite high price and lack of interest in off-road adventurism. "Three box" models (i.e., sedans) outsell sporty "two box" formats. Roomy back seats are de rigeur for aspiring CEOs who must, one day, hire a chauffeur. Online "car clubs" -- sites on which legions of men wax poetic about "mechanical second wives" - pervade cyberspace. (According to CIC, China's leading digital tracker, the auto category is the leading source of internet "buzz.") To boot, the primacy of status projection explains the dearth of drive-through fast food joints, fixation with vehicle personalization, a surfeit of gaudy decals, "lucky man" license plate numbers and tchotchke zoos on dashboards.
Buyer Anxiety. Yes, in China, cars and identity are inextricable. But marketers must avoid monomaniacal status-driven sells. Middle class buying instincts are polarized between bold ego magnification and insecure protection. For every RMB "invested" in advancement, two are put aside for rainy days. Disposable income is constrained, in absolute terms, by low wages. Gun-shy spending and sky-high savings rates are reinforced by: a tattered welfare net; a health care system driven by red envelops slipped in pockets of underpaid doctors; exorbitant education fees; real estate that, relative to income, is amongst the most expensive in the world; an overregulated financial-services market that precludes rational return; and a political system in which economic interests remain neither protected nor represented. Across China's Darwinian economic landscape, the outlay required for a car is, to say the least, a very risky proposition.
How to Reassure. Auto manufacturers must root brands in projective and protective benefits. The dealership experience, in particular, is critical in addressing both needs. Regarding the former, the sales force must treat prospective customers as visiting royalty. Premiums should be offered as testaments of appreciation; vintage red wines and Mont Blanc pens scream "respect." Wives and children who accompany fathers to showrooms must be pampered as queens and princelings.
Status fixation, however, is often trumped by anxiety. To mitigate last-minute jitters, marketers must make buyers feel secure. Here are a few ways of closing the deal:
First, present the brand as global leader with unmatched scale, a critical reassurance point for first-time buyers and consumers in non-coastal cities. Name plates should be "stretched" across price tiers to brand heft. (Warning: care must be taken to avoid image degradation of premium lines, usually via skillful deployment of sub-brands. Buick's efforts in this respect have been masterful, as have Audi's.) Heritage claims buttress perceptions of scale, as do frequent mid-cycle innovations and product upgrades.
Second, focus on fuel efficiency and safety standards as tactical -- not primary -- messages. Ford's Mondeo Eco-boost hits the sweet spot of desire by seamlessly fusing engine power with impressive mileage claims. Dealership agents should be guardian angels, obsessed with the safety of papa bear's cherished dumplings. On-site brochures must highlight anti-skid brake systems, whiplash-resistant airbags, any features linked to "control of the road."
Third, service guarantees must be iron clad, presented as a gold-plated certificate of reassurance. Throughout an extended warranty period (and beyond), dealerships should promise 48-hour repairs. Supply chains and inventories must be reconfigured to minimize shortage of parts, all of which must be available within 24 hours. More ambitiously, in geographies requiring long travel to service centers, parts can be "brought to the driver."
In conclusion, the Middle Kingdom auto market is booming. For China's ambitious middle class, big cars and big egos go hand in hand. However, given the insecurity of a skittish new elite, brands must both project status and protect interests, both physical and economic. This pivot requires flexibility and focus.
Like other BRICS nations, China economy can benefit from mid-value cars, like the under $3500 Tata Nano, and the Renault-Nissan small car in same price range. The small motors on these cars can be rigged to run biofuel, pollute less. During Cold War westerners would joke about the little East German Trabant car, but nobody joked when advertising agency genius David Ogilvy got beind the West German Volkswagen developed during the Hitler era, and made the small car respectable in US, Mexico, Brazil. If the need for greed in autombiles continues, it is a reminder of just how uneven income distribution remains for China and that is a difficult challenge for government and business and bankers.
Can someone tell us whether this asspcoatopm is found in Chinese lauguages? Perhaps an ideogram.relating the horse to ptivileged status?
There should be no surprise in seeing peoples in other lands adopt the culture of the automobile. The cultural significance of self-ditected tansportation is overwhelming.
If we were truly responsible we'd cut our fuel/energy consumption here in the U.S., yet I don't see it happening without another big oil shock. We'll all be living in "interesting times."
Proof of success.
Whether they "need" it or not.
*******There are plenty of other coats and watches.
At least a car can be useful.
The place is a dump.
The air pollution comes more from coal fired industrial development than from automobiles. It was already bad before the influx of automobiles. The automobiles sold in China have the same pollution control mechanisms American or European cars have, simply because it's cheaper and more profitable to sell the same designs there as are sold elsewhere.
California cleaned up the air in LA when they realized the cost of pollution exceeded the benefit from allowing it. I expect China will do the same, for the same economic reasons.
Other parts of China do not suffer from that kind of air pollution you see in Beijing, although there are other industrial cities that do.
And while some roads are crowded, particularly in the cities, I saw nothing worse than anything I've observed in DC, NYC, Atlanta or LA. Beijing and other Chinese cities are much more bicycle friendly than anything I've seen in the U.S.
They have more mass transit & better inter-urban rail service as well.
Beyond the urban areas, the highways I saw reminded me of traveling Route 66 back in the early 60s, just before I-40 replaced it.
US dont seem interested, tho it suits china even better - cng = more limited range - cng civic (made in usa) = 200k/180 miles ~.
cng is; cheaper, cleaner & plentiful.
They had a rough start in the industrial age. But the Mao Dynasty is just getting started. Soon the Chinese will become a global power and they will be every bit as annoying as Americans. But the Chinese have one major difference. Americans believe that hard work should be rewarded. The communist Chinese don't. They believe the state should be rewarded.