McKinsey: Car shoppers now more pragmatic
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.