Multiple factors slow
sales and erode value
SUVs remain popular, and luxury is resilient
Car Sales declined for the second consecutive year because of multiple factors, including the slowdown of China’s economy, local air quality regulations that limit car sales in major cities, the reduction of government financial incentives for purchasing electric cars and other new energy vehicles, and the impact of trade tensions on the sales of US car brands.
Total car sales dropped 8.2 percent and even sales of new energy cars fell 4 percent during 2019, according to the China Association of Automobile Manufacturers. Then production halted and sales plunged during the lockdown period of the COVID-19, and the value of the cars category declined 15 percent, making it one of the weakest performers among the 24 categories examined in the 2020 BrandZ™ China Top 100.
When China emerged from the pandemic, sales began to rebound as brands promoted online, even livestreaming vehicle launches. Dealer promotions, financing schemes, and an extension of government subsidies for new energy vehicles helped stimulate demand. Consumers intended only to postpone, not cancel car purchases, according to Kantar research. which also found that people, especially first-time buyers, were considering purchasing a car as a healthier alternative to public transportation.
SUVs remained more popular than sedans across cities of all sizes in 2019, although car buyers in lower tiers might choose sedans and local brands for affordability. The luxury segment of the market showed strength. And because of increasing disposable income, luxury purchasing extended to lower tier cities, even among young people purchasing entry-level models.
Among luxury brands, such as BMW, Audi, and Lexus, Mercedes-Benz did particularly well, having introduced new models. The Japanese car brands, including Toyota, Honda, and Nissan, also performed well overall because of a reputation for affordable quality and after-sales reliability.
Cars remain an aspirational purchase in China, which is part of the reason for strength at the premium end of the market. But many car customers are first-time buyers, and the replacement and second-car markets are growing.
Meanwhile, the customer journey is evolving. Customers are more knowledgeable because of the availability of online information. Dealerships remain experience touchpoints, which are particularly important for expanding penetration in lower tiers locations.
The government is expected to support the further growth of new energy vehicles by encouraging the conversion of existing fuel stations into charging stations and the establishment of new support services, such as battery replacement. Tesla, which began selling its first China-made cars, opened several thousand charging stations the country.
Faced with increased transport choices, such as ride hailing and bike rental, Chinese car brands invested in alternative mobility options to complement their car businesses. On a Kantar index measuring mobility readiness, four of the Top 10 cities are in China: Beijing, Chengdu, Guangzhou, and Shanghai.