China’s Auto Industry – As Unique As It Is Large

45 new vehicles are sold a minute in China – 23.5 million in total last year.  That’s 42% more than the world’s second largest market, the U.S.  By 2030, Chinese consumers are expected to buy more new cars than the U.S. and Europe combined.

Few products represent the scale and rising affluence of Chinese consumers like the auto industry has, but it is still early days.  In 2005, Chinese owned 17 cars per 1,000 people.  By 2020, it will be 184 cars per 1,000 according to Cetelem.  If you compare that to the 809 in the U.S., there is still plenty of room for growth.

With such a prize, China’s car drivers have courters from almost every car manufacturer on the planet, including hundreds of local makers.  However, unlike most industries where Chinese consumers are warming to local brands, the share of Chinese branded vehicles has dropped from around two-thirds in 2000, to 45% in 2013.  Excluding commercial vehicles, just 29.5% of passenger cars sold are Chinese branded.  

In 2013, Bloomberg reported in Shanghai – a barometer for many Chinese consumer trends – more than 9 in 10 cars on the road were foreign brands.  With 41% of Tier 1 city consumers considering a car a symbol of status and success, that eminence is amplified with a European or American badge on the bonnet – for now at least.

Like most products in China, online channels significantly influence purchase behaviour, reflected in the $1.55 billion JD.com and Tencent invested for 28.3% of car information site Bitauto last week.  A few years ago, Volkswagen’s People’s Car Project, created crowdsourced concepts for the VW of the future, attracting 33 million visitors and 119,000 ideas.  

A global survey by Capgemini last year found 97% of respondents post, or intend to post, their vehicle experience on social media and 61% of Chinese consumers are likely or very likely to buy a car online.  60,000 cars sold in two weeks on Weibo last August.  Digital’s relevance is likely to increase even more for car marketers, particularly as old-fashioned tactics such as luring enthusiasts with leggy models at car shows could be banned.

There’s no question of the Internet’s influence on China’s car buyers, but it will be a long time before it replaces the traditional dealership.  Even consumers who purchase cars online still pick them up at the dealership.  Like many product categories, online channels usually compliment rather than substitute offline channels, and there are many synergies to be achieved by well executed integrations of the channels. We hope you enjoy this week’s Skinny.

 Chinese Consumers

China’s ‘New Normal’ is More Alibabas, Fewer Smokestacks: China’s economy of 2015 resembles Japan’s in 1995 in many ways, but the comparisons are often overdone. It is unlikely China will follow Japan’s years of stagnation in the near future, and with good reason.

Remember Palm? A Chinese Company Is Resurrecting the Brand: Retro tech is back in the U.S., and it is being driven by Chinese companies.

Selfie-ism or Selfitis?: From the 700 million Selfie posts on Weibo, to the Chinese-made drones taking Selfies to the next level, the art is becoming a religion in China.

 Auto

Internet Car Sales Click With Chinese Consumers: “In my personal opinion, online sales in the total car market in China will account for 10% in the near future,” says CMO of Volkswagen Greater China and ASEAN. Yet the Internet will compliment dealerships, rather than displace them.

End of the Road for Racy Models at Chinese Autoshow?: Shanghai Auto Show’s famous models, many flown in from Europe, could be banned as part of a Government campaign to crack down on what it sees as increasing vulgarity in society.

 Internet, Social Media, Ecommerce & Mobile

China’s Online and Shopping Up a Storm: Infograph summarising the digital opportunities in China, adapted from a China Skinny presentation.

Sneak Peek: WeChat Users Are Reading What!: More than half of WeChat article readers read more four or more articles a day. Health and eating well account for 3 of the top-5 most-read subjects.

Xiaomi’s Lei Jun Reveals the Company Sold Over 61 million Smartphones in 2014: Xiaomi more than trebled last year’s figure of 18.7 million sales, shifting over 61 million devices. It has also revealed the next version of its top-selling budget series, the Redmi 2, feature-packed at ¥699 ($110).

China Snaps Up More iPhones Than U.S. Does: China could account for as much as 35% of Apple’s global sales in Q4 2014, up from 22% in the same quarter last year, helped by big screens and China Mobile-compatible devices. USA’s global share dropped from 29% to 24%.

 Food & Beverage

Pushing the Potato: China Wants People to Eat More ‘Earth Beans’: China’s Government is hoping to get more farmers to grow spuds to reduce the nation’s reliance on imported and irrigation-thirsty rice. Potatoes will be mixed into bread, steamed buns and noodles to suit Chinese consumers’ taste and habits. Total food consumption in China is projected to grow by 12% by 2020 according to the World Bank.

Growing Chinese Demand for Imported Fruit, but Logistics a Challenge: The number of allowed fruit and veg products on the Chinese market has increased rapidly in recent months. Chinese retailers are increasingly focusing on direct sourcing, however it becomes difficult to service them without the correct logistics.

Interview – Con Constandis, Pernod Ricard Asia Travel Retail Managing Director: Sales in Pernod’s border stores that reach travellers jumped by between 30% and 40% in 2013, while the overall market was subdued. China’s airports are modernising their retail spaces, moving away from a previous focus on baijiu and stuffed panda toys towards internationally-recognised brand names. One of Pernod’s main products in the Travel retail space is Martell Noblige; launched just eight years ago, it is already the largest Cognac brand in China.

 Property & Finance

Chinese Pour $1.23B into Sydney Real Estate in Last 2 Months – More on the Way: The last 2-months of 2014 saw $1.23 billion of deals in Sydney from Chinese buyers, contributing to a record 2014 for Chinese investment in the Australian market in general, with acquisitions from Chinese buyers doubling compared to the previous year.

China’s “Big Four” Banks Lose Out as Savers Gain Sophistication: Chinese banking customers – particularly the affluent ones – are embracing digital banking and a more sophisticated array of products. Between 2011 and 2014, the big-four bank’s share as a primary bank dropped from 78% to 73% according to McKinsey. The gap between the uptake of products between different city tiers is shrinking.

 Luxury

How Heritage Drives Success of Chinese Luxury Brands: Although Chinese brands barely register when Chinese consumers are asked to name their top-5 luxury brands, local brands who identify with cultural elements that resonates with Chinese, combine cutting edge manufacturing and market with a balance of modernity and traditional heritage are showing promise.

That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing, research and digital advice and implementation.

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