Younger, first-time buyers focus on usability, not status
Compact vehicles are now the fastest-growing segment in the automobile market, and the expansion is likely to maintain its momentum in the near future owing to the downsizing trend sweeping the industry, according to insiders.
The compact segment will be the growth engine for the Chinese auto market for the next two to five years, as a result of Chinese customers looking for easier mobility solutions, according to the commentators’ predictions.
“The popularity of the compact models is in line with the global downsizing trend, and it will continue as carmakers need to attract buyers while complying with increasingly strict emission controls,” Zheng Yun, principal of the automotive practice at German firm Roland Berger Strategy Consultants, told China Daily.
Zhao Xinzhi, director of Nielsen C h i n a ’s a u t o v e r t i c a l d i v i s i o n , said:“Demand for compact cars will heat up in the coming five years, fueled by Chinese customers’ strong demand.”
Compact cars are models with a body between 4.3 meters and 4.6 meters in length, or with a wheelbase between 2.5 meters and 2.7 meters. For example, the popular localized Volkswagen Lavida family that features a 2.61-meter long wheelbase is categorized as compact.
Although the best-selling sedan in 2016, Volkswagen Lavida’s sales volume of 478,699 vehicles was behind the best-selling compact multi-purpose vehicle and compact SUV.
Last year, Wuling Hongguang’s compact MPV passenger vehicle sales took top place with sales volume of 650,018 vehicles. The Haval H6 compact SUV ranked No 2 with 580,683 sales.
Nine of the 10 best-selling models in 2016 were compact vehicles, statistics from China Passenger Car Association showed.
Some 17 out of the top 20 models were compact, while the combined sales volume of those 17 totaled 5.8 million vehicles, a 24.9 percent share of the entire passenger car market last year.
Zhao, at Nielsen China, said:“In five years, the volume of compact SUVs will double the current amount, while demand for compact sedans, hatchbacks and MPVs will remain very strong.”
The United-States-based consumer research company found that the majority of new car buyers in China are also first time buyers, and that compact cars fit their preferences perfectly.
Zhang Zhenhua, vice-president of Nielsen China, said that Chinese customers are considering their actual usage needs more and more, instead of being moved by swanky consumption, and that first time buyers’ desire for easy-to-use products point them towards the compact segment.
She said to China Daily:“The compact models, smaller than those used for showing off, are easy to drive, easy to park, and consume less petrol.
“The compact SUV is the fastest expanding segment, surging ahead with about 45 percent g r o w t h y e a r - o n - y e a r, a n d t h e trend may continue for two or three years.”
Responding, adapting to a developing market
Zheng, at Roland Berger, said that compact models are the mainstream option that are eligible for the nation’s tax cuts on cars with 1.6-liter engines and smaller.
“Besides the favorable policy, fierce competition in the compact segment has driven the race for eye-catching design and attractive prices, so the value for money attracts yet more buyers,” he added.
To seize the opportunity provided by C hinese buyers’ sustained demand, many carmakers in the country started planning and developing compact models years ahead to adapt to the downsizing trend.
Audi and BMW are among the auto brands that spotted the trend, demonstrating their future orientation by localizing their premium compact products for the Chinese market.
A u d i ’s l o c a l l y m a n u f a c t u r e d compact models, the Audi A3 sedan and Q3 SUV, have contributed about 30 percent to the brands’ total sales volume of 589,088 vehicles in China last year.
“We are hoping to seize the oppor tunity of the downsizing trend and we expect that, together with the best-selling 5 Series, the new BMW 1 Series Sedan will contribute greatly to our growth in China,” said Olaf Kastner, president and CEO of BMW Group Region China, in an earlier interview.
Xu Haidong , assistant to the secretary-general of China Association of Automobile Manufacturers, said: “Automakers are alert to consumption trend developments. They receive feedback from the market and make adjustments accordingly.”
The popularity of the compact models is in line with the global downsizing trend.” Zheng Yun, principal of the automotive practice at Roland Berger Strategy Consultants