Beijing, June 24, 2010----On June 24 EUCCC (European Union Chamber of Commerce in China) hosted a symposium entitled “China’s Auto Industry: Inside and Outside China” at Beijing Kerry Center Hotel. Tony Liu, Senior Vice President of Sinotrust, was invited to deliver a speech named “Review and Outlook of the Chinese Automotive Industry” at the symposium.
Tony Liu, Senior Vice President of Sinotrust, is delivering the speech
When reviewing the development path of the Chinese automotive industry, Liu said the industry experienced a fast growth in the past decade. The growth rate of the Chinese automotive market since 2000 has remained above 23.3%, which is much higher than the growth rate of the last decade of the 20th century and greatly outpacing the average growth of the global auto market over the same period. In 2009, China edged out the U.S. as the world’s largest auto consumer by consuming more than 13 million vehicles, and its share in the world’s total auto consumption increased to 22.4% from 3.6% in 2000.
Over the past decade, the Chinese auto industry has already formed a complete industrial chain and the product structure of the Chinese auto market has undergone remarkable changes --- the number of passenger vehicle models has overtaken the commercial vehicle models; the passenger vehicle market has become very crowded with the number of marketable passenger vehicle models increasing to 252 in 2009 from 14 in 2000; the Chinese vehicle parc has increased rapidly and reached 62.88 million in 2009 with the eastern region showing the highest number of vehicles per 1,000 inhabitants; Vehicles, which were once luxuries, are fast becoming an everyday item with A-segment vehicles (suitable for family use) slowly eroding the market shares of B- and C-segment vehicles; the auto consumption in China is becoming more diversified with SUVs and MPVs gaining more favor among Chinese consumers; the combined market share of Chinese auto brands is steadily increasing and reached 31.0% in 2009, while the market shares of other joint ventures remain stable.
According to Liu, the Chinese automotive industry will have the follow six trends in the future:
Trend 1: China’s entry into the period of “Auto Society”
The development of the Chinese auto industry and auto market is mainly influenced by the following factors: macro economy, industry policy, consumption demand, auto supply and external constraint. The fluctuation margin of the Chinese economy will narrow down, which will set a favorable stage for the development of the Chinese auto market in the next ten years; following two waves of explosive growth, the Chinese auto industry will enter into a stable period of growth; as the Chinese auto market develops in an echelon pattern, the demand for vehicles will long exist. Currently, consumers’ purchasing power varies greatly across provinces and the major auto markets in China are still in the developed provinces and major cities. Although the auto market of developed cities is becoming saturated, the purchasing power of underdeveloped regions and rural areas is not yet developed, which somewhat decelerates the development of the Chinese auto market. In the next decade, the market growth will slow down. By 2020, China’s annual auto sales volume is expected to amount to 40 million units.
Trend 2: From “International brands entering China” to “Chinese brands going global”
As the Chinese auto industry is increasingly linked to the global auto industry, export will be a future trend. In the long run, the Chinese auto industry will adopt an export-oriented strategy. This is also an approach to absorb the current excessive production capacity. However, to implement the strategy, the industry needs to tackle problems of brand, performance, product quality, safety and after-sales service etc., and at the same time face negative factors like trade protectionism, appreciation of the RMB and the global economic recession.
Trend 3: Thriving of new energy vehicles
The continuous downtrend in the petroleum economy will set a stage for the development of new-energy vehicles. According to China’s energy structure, energy resources and technological capability, electric vehicles have been chosen as the focus of the development of Chinese new energy vehicles. However, to develop electric vehicles, the industry should first solve the problems concerning supporting facility construction, high-power battery technology, industry access policy and product technological standards, and business models.
Trend 4: Marketing revolution driven by changes in consumption structure
The auto consumption structure in China is undergoing great changes and auto consuming behaviors will be diversified in the future:
1. Changes in the demographic structure: Changes are taking place in the wealth structure; both rational and impulsive consumers co-exist; young users, female users and individualist users account for much larger proportions than before; tier-3 and tier-4 markets witness fast growth, and regional variation in cultural values plays a bigger role there.
2. Changes in car usage: The passenger vehicles only for business use and those for both business and family use still account for a large proportion. In addition, the demand for upper-medium class vehicles is strong. In the future, an increase in the proportion of the vehicles only for family/private use will drive up consumers’ preference to low-class vehicles of small displacement.
3. Changes in car-purchasing demand: Currently, first-time vehicle buyers compose the majority among auto consumers, with the number of non-first time buyers increasing quickly. As non-first time buyers will become more concerned about family life and more interested in road trips, their demand for family-use leisure sedans will go up.
4. Broader information channels: Nowadays consumers are able to obtain information from various channels. Therefore, innovative and integrated marketing models will become the future trend. Quicker access to various kinds of auto-related information will become available. The ever-expanding dealer networks will offer consumers more choices, which will make consumers hold a more favorable position for bargaining.
5. Group decision-making playing a bigger role: In the past, people’s social network was small. Now, with its increasing importance, consumers want to hear their relatives’ or friends’ opinions before making a purchase decision
Trend 5: Channel model innovation driven by market growth
The competition in the pre-sales and sales sections is increasingly fierce, while the after-sales market is also strategically important. In the future, channel models will be more flexible and diversified, shifting from the single-4S model to a multilevel model. Independent after-sales service providers are emerging, with express repair chain stores attached to parts manufacturers, lubricant producers and tire producers achieving scale. At the same time, the business model of dealer groups is still at the exploratory stage.
Trend 6: Extensive application of precision marketing represented by database marketing
Precision marketing is an effective measure to improve the effects of various types of marketing activities. Based on the current market status, automakers should abandon extensive marketing strategies, and adopt precision marketing represented by database marketing strategies to further segment customers and customer needs, optimize the design and plans of marketing activities, and conduct a series of work including customer identification, customer acquisition, customer management and customer potential development, to eventually achieve better marketing effects.
This EUCCC’s symposium also invited Mr. Waldemar A. Pfoertsch (A professor from China Europe International Business School) and Mr. Lin Mi (Market Department Manager from BYD) to make speeches and Mr. Bernd Pichler (Volkswagon (China) Import) to host the symposium. Mr. Pichler is also the chairman of the Auto Components Working Group Shanghai. This grand event also attracted more than 100 participants from multiple transnational companies and institutions across various sectors such as automobile, investment, consulting, manufacturing, logistics and media. After the symposium, the participants had a friendly and broad discussion with the speechmakers on the Chinese automotive industry.
“Sinotrust is a member of EUCCC. Through this platform, we can directly communicate with EU enterprises and other foreign companies that operate in China. Also we can help them understand China’s economic environment, markets, consumers, as well as Chinese companies, through our products and services” said Lucy Wang, the director of the market department of Sinotrust.
When talking about this speech, Liu also thought it was “meaningful”. He said:” from the participants’ enthusiasm, I can feel that the achievements the Chinese auto industry has made have already attracted worldwide attention. I am very glad to provide professional market research and marketing consulting services to help foreign automakers and investors in China to make better marketing or business decisions.”
Last year, Sinotrust also made speeches on the current status and future trends of the Chinese automotive industry at Amcham-China and CCIFC. Both speeches were well received.
About Sinotrust Automotive Marketing Solutions
Sinotrust is a leading supplier of marketing solutions to the Chinese automotive market. With offices in Beijing, Shanghai and Guangzhou, we have a team of over 260 skilled professionals devoted to our automotive marketing solutions. Our Automotive Marketing Solutions integrate information, services and technology to provide marketing research services, marketing consulting & business strategy services and database marketing services, helping automotive companies position their products correctly, identify target markets accurately and conduct effective marketing so as to develop sustainable and profitable customer relationship.
About Sinotrust
Sinotrust is a leading supplier of marketing solutions and credit solutions in China. We collect, analyze and manage information about markets, consumers and businesses to provide marketing research, business information, consulting and database marketing services through integration of information, services and technology. Our products and services help you make better marketing and credit decisions and develop profitable customer relationships.
Over 80% of the Fortune 500 companies operating in China are using different products and services of ours. We employ over 700 people in our offices in Beijing, Shanghai and Guangzhou, supporting organization clients from automotive, financial services, insurance, retail, telecommunications, IT, manufacturing, consumer products and trade sectors.
At the beginning of 2007, Experian, the leading global information services company, made a strategic investment in Sinotrust with both capital and know-how. The investment keeps on improving our service capabilities.
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