McKin­sey: Car shop­pers now more prag­matic

China Daily (Canada) - - SHANGHAI - By YU RAN in Shang­hai

yu­ran@chi­nadaily.com.cn

Chi­nese car own­ers are be­com­ing less sta­tus-con­scious than ever, and many of them would rather trade in their used cars than buy new ones, ac­cord­ing to the lat­est auto sur­vey con­ducted by man­age­ment con­sult­ing firm McKin­sey.

The sur­vey found that nearly half of the 3,500 peo­ple sur­veyed see cars as necessities rather than sta­tus sym­bols.

China’s car buy­ers have in the past decade ben­e­fit­ted from fall­ing car prices — 4 per­cent each year — due to in­tense com­pe­ti­tion among au­tomak­ers. But de­spite the greater price com­pet­i­tive­ness of new cars, used cars are in­stead be­com­ing in­creas­ingly pop­u­lar. The sur­vey showed that al­most half of the con­sumers polled con­sid­ered pur­chas­ing a used ve­hi­cle when they last shopped for a car.

Chang­ing con­sumer at­ti­tudes and macroe­co­nomic head­winds will be slow­ing the growth in China’s ve­hi­cle mar­ket. From 2010 to 2015, ve­hi­cle sales in China in­creased by more than 12 per­cent yearly. From now till 2020, how­ever, McKin­sey ex­pects the ve­hi­cle mar­ket to grow by an av­er­age of 5 per­cent an­nu­ally.

“Al­though China’s new-car mar­ket is likely to grow more slowly through 2020, it still holds con­sid­er­able prom­ise for au­tomak­ers, car deal­ers, and ser­vice providers,” said Gao Xu, se­nior part­ner and head of McKin­sey’s Au­to­mo­tive Prac­tice in Asia.

Ac­cord­ing to the sur­vey, more than half of the re­cent car buy­ers who were polled ex­pect to trade in their cur­rent ve­hi­cles in the fu­ture — 37 per­cent plan to switch to a bet­ter brand while 16 per­cent in­tend to get a bet­ter model from the brand they own now.

“The sur­vey high­lights con­sumer seg­ments that could emerge as new en­gines of growth in China’s auto mar­ket as more con­sumers as­pire to up­grade to a bet­ter brand when they buy their next car,” said Daniel Zipser, part­ner at McKin­sey’s Shang­hai of­fice and head of McKin­sey’s Con­sumer and Re­tail Prac­tice.

McKin­sey also dis­cov­ered that con­sumers are in­creas­ingly turn­ing to dig­i­tal me­dia for in­for­ma­tion about cars. Pro­fes­sion­ally-run au­to­mo­tive web­sites and dis­cus­sion fo­rums like Au­to­home now rank among the most pop­u­lar sources of in­for­ma­tion and are fre­quented by 58 per­cent of the re­spon­dents.

Con­sumers are also learn­ing about cars via so­cial net­works, other In­ter­net com­mu­ni­ties and au­tomak­ers’ web­sites. Rec­om­men­da­tions from fam­ily, friends and col­leagues are still val­ued by con­sumers (54 per­cent), but they are no longer the lead­ing in­for­ma­tion source that they were in 2011.

Based on the sur­vey find­ings, on­line research tends to make con­sumers think they should spend less on cars, es­pe­cially at the higher end of the mar­ket. On av­er­age, the car shop­pers sur­veyed ex­pect a 15 per­cent dis­count on the re­tail price of new cars and a 20 per­cent dis­count on the price of used cars. More than 60 per­cent of con­sumers credit those ex­pec­ta­tions to on­line sources, which al­low them to find dis­counts eas­ily.

Wouter Baan, an as­so­ciate part­ner at McKin­sey’s Beijing of­fice, be­lieves that this on­line buy­ing trend will ac­cel­er­ate as dig­i­tal chan­nels im­prove.

In ad­di­tion, the sur­vey found that a con­sid­er­able num­ber of con­sumers, es­pe­cially those in high-tier Chi­nese cities, are now more re­cep­tive to al­ter­na­tive trans­port so­lu­tions.

For 37 per­cent of the con­sumers sur­veyed, own­ing a car seems less important now as other forms of trans­port are avail­able. A sig­nif­i­cant por­tion of con­sumers be­lieve they can meet their trans­port needs via rent­ing (40 per­cent), leas­ing (34 per­cent) or co-own­ing cars (26 per­cent) rather than buy­ing.

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