Cars: Economic trends slow growth of car category
Premium segment of the market performs well
The car category declined 5 percent in value following a 5 percent increase a year ago. Several factors influenced the decline, including the slowdown in the rate of economic growth and caution about big-ticket spending because of the trade tension between China and the US.
Other influences on car sales included the growth of ride-hailing services, the increase in the sales tax rate, and the decline of government incentives for car purchasing. Total vehicle sales volume for the first three quarters of 2018 reached 20.5 million, a year-on-year increase of only 1.5 percent, according to the China Association of Automobile Manufacturers.
Cars remain an aspirational purchase, however. The premium segment of the market continued to perform well. As the replacement market grows, consumers are looking to trade up with their next car. Although this trend is mostly concentrated in the major cities, it is beginning to happen in lower tier cities as well.
The environmental-friendly or new energy segment of the market was also strong, as China’s vehicle charging infrastructure continued to expand and the government incentivized car makers to produce electric vehicles. Sales of plug-in hybrid vehicles increased 146.9 percent through the first three-quarters of 2018, according to China Association of Automobile Manufacturers.
The electric vehicle brand BYD, one of the two car brands ranked in the BrandZ™ China Top 100, increased 20 percent in brand value. The other brand, the popular SUV brand Haval, is new to the ranking because its results are for the first time broken out from its corporate parent, Great Wall, which appeared in prior BrandZ™ China rankings.
Great Wall is among the Chinese car makers with aspirations to build the brand abroad. Focusing on some of the countries targeted in China’s Belt and Road initiatives, Great wall is building a plant in Russia to begin production in 2019. Great Wall has also announced plans to enter the US market in 2021. Chinese car brands are also studying South American markets.
Shopping habits vary by intent and region
As cars sales slow, it becomes especially important to understand what motivates Chinese consumers to purchase a first car or trade up. Awareness and quality reputation are key for mainstream brands. Premium shoppers seek experience. How consumers shop for cars depends on where they live. In higher tier cities, consumers go to online car sites. In lower tier cities consumers are more likely to go to the traditional search engines. Auto shows are important. In higher-tier cities consumers use the shows to gain knowledge about new models. In lower-tier cities, consumers search for price discounts from local dealers.