In 2008, the Chinese auto market grew at an annual rate of about 7 percent, the lowest since 2000. However, it increased at about 40 percent in 2009, a splendid performance for the Chinese auto market. The sales volume broke the line of 10 million vehicles and is likely to hit 13 million. The Chinese auto market is no doubt the biggest in the world.
The rapid growth of the Chinese auto market in 2009 was partly attributed to promotion of the government policies. The stimulus policies included lifting the ban on 1.6T cars, the car subsidy program for rural areas and the old-for-new vehicle scheme. In 2009, the fast growth in auto sales was also attributed to contributions of third-tier and fourth-tier cities and cities from central and western regions. The growth rate hit 110 percent in some areas. The sources of sales growth have substantially changed. The third major feature was that auto buyers had changed. Previously, only the well-off bought vehicles. Now, common consumers become the bulk of auto buyers. In this sense, China has truly stepped into the auto consumption age in 2009.
Auto consumption loans will re-stimulate prosperity in auto market
The government’s auto consumption loan policy has played an essential role in stimulating auto sales from one million to four million vehicles from 2001 to 2004. From 2004 to 2008, auto sales soared from 4.3 million to 9 million, with 160 billion yuan loan extended. Such a rise from 4 million to 9 million autos showed that auto consumption loans did not played significant roles. It indicates that if we expect to further stimulate auto consumption, we need a more powerful stimulus measure in promulgating credit policy. Credits have two functions: First, they lower the threshold. Second, they not only lower the threshold for consuming high-priced autos, but also facilitate consumption growth and auto model structure improvement.
New energy will not develop in one step
New technologies largely refer to new energy technologies, such as environment protection and low carbon emission. But I think these technologies will hardly be applied in large scales in a short term. Technologies promoting environment protection and fuel mixture are more widely used. I think consumers prefer two technologies – one for security and another for environment protection. Energy prices are rising continually. Therefore, the two technologies will leave greater impacts on auto consumers next year.
New revolutions in channel allocation
4S stores have accelerated the development of Chinese auto industry. When they buy autos for the first time, consumers largely have no idea what are the differences among brands. The image of 4S helps consumers know more about brands, enabling them to rapidly know what the brands mean. But when it came to 2009 and 2009, 4S stores met great problems in convenience, investment costs, and entering third-tier and fourth-tier cities. It became a problem on how to distribute the 4S system in the third-tier and fourth-tier cities, how large outlets to build and how much money to invest in these cities in the two years.
There are basically four methods for businesses to set up outlets in third-tier and fourth-tier cities. First, set up outlets in first-tier cities and then examine the practice in third-tier and fourth-tier cities. Second, choose some capable outlets in first-tier and second-tier cities to test operations in third-tier and fourth-tier cities. In this way, some will not have the chance to expand, while others have the opportunity. Third, set up 4S stores directly in the top 100 counties, similar to those in first-tier cities. Fourth, in order to lower costs, allow businesses that have two brands to set up joint exhibition halls in third-tier and fourth-tier cities, when they will establish two 4S stores in first-tier cities respectively. However, they should separate their after-sale services. Therefore, third-tier and fourth-tier cities have become a major direction in channel changes. Second, a major change is that China has entered a rapidly developing stage. Auto sales will expand in scales, growing by 4 million from 9 million to 13 million. China is estimated to sell 20 million autos a year. It needs more 4S stores, indicating it has entered a swift development stage. Auto dealers will benefit greatly in this process. They will have more outlets, greater scales, wider coverage, and even monopoly in some regions. Third, capital will emerge in dealer channel development. These are the three major features in China’s auto channel development.
Regional marketing and subtle marketing are directions
China is about as large as Europe. Therefore, China will have sharper cultural diversity in the future. It is simple in reasons. The first-tier and second-tier cities are largely identical in cultures. But the diversity will become larger when it comes to third-tier and fourth-tier cities. In other words, when third-tier and fourth-tier cities enter the high-speed development stage, Chinese regional cultures will show big differences. As a result, regional marketing becomes crucial. Chinese cultural diversity will make marketing activities differ in various regions.
Besides, China boasts a multitude auto brands. Can we produce one brand autos to satisfy more users? These days, China has few homemade branded auto manufacturers that sell more than 200,000 vehicles a year. The 200,000 vehicles are a line. But it is possible to break the 200,000 line this year, along with the fast development. It shows the characteristics of the Chinese market. Many auto models were introduced in the very beginning, because of fast growth rates. China’s great diversity and multi-layer features result in great demands for autos. Consequently, individualized vehicle models will be very important in the future. China’s auto buyers are also becoming growingly young. In foreign countries, young people will have to save money to buy cars. But Chinese young fellows may enjoy subsidies from their parents.
Chinese auto manufacturers meet other problems. How to keep your users loyal when they come to replace existing autos? How to have your users stay as long in your after-sale service mechanism? How to make them content? What we are talking about arranging in proper order, analyzing and exploring the tremendous amounts of data are exactly precision marketing. Such marketing will not be settled with traditional methods. Businesses have to master advanced data mining tools, data analysis models, and tools to manage the marketing of tremendous amounts of customers.
Author: N/A
Interviewee: Lin Lei, Co-President and CEO of Sinotrust
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