China's automotive market - How to merge into the fast lane with consumer and digital marketing insights - Accenture
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China’s automotive market How to merge into the fast lane with consumer and digital marketing insights
China’s spectacular economic growth over the past 20 years is
reflected not only in a tenfold increase in its gross domestic
product, but also in the emergence of the world’s fastest-
growing consumer market and a vibrant, burgeoning
middle class.
As incomes in China have risen, so have analysts of IHS Automotive estimate is still quite immature and consumer
Chinese consumers’ interest in products that vehicle sales will grow by a healthy behaviors are continually evolving.
that were previously out of their reach. 8.8 percent in 2013 and average about There is still plenty of time and plenty
Automobiles fall squarely into this 6 percent year-over-year growth through of room for other local and foreign auto
category. In 2005, approximately six 2020. In that year, 31 million passenger manufacturers to capture significant
million vehicles were sold in Greater cars and SUVs will be sold in Greater market share. At Accenture, we believe
China. In 2012, that number had climbed China (see Figure 1). By comparison, the OEMs that will fare best in China
to nearly 19 million, making Greater the second largest market, Europe, are those that will truly understand
China the largest automobile market will report auto sales of only 23 million.1 the needs and preferences of Chinese
in the world. While this exceptional It is not surprising that automobile consumers and then give them what they
compound annual growth rate (CAGR) manufacturers from around the world are want—in terms of vehicles and the overall
of 18.1 percent is not expected to placing China at the very center of their car-buying experience.
continue, there is no doubt that Greater long-term growth strategies. Currently,
China will remain the number one car- Volkswagen is the undisputed sales
buying nation for years to come. Market leader. However, the consumer market
Figure 1. While China’s automotive market growth is cooling down, it is still
expected to reach 31M new registrations in 2020.
Greater China Light Vehicle Sales Development (2005-2020; Millions of Units)
+
6.3%
30.3 31.0
29.5
28.5
26.9
+
+48.1%
25.2
18.1% 23.1
20.9
17.3 18.0 19.0
13.3
+221.2%
8.9
8.3
7.1
5.9
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: IHS AutoInsight April 2013; Accenture Research Analysis
1
2
Who’s in the driver’s seat? 3
China is a huge and highly complex automobile market.
The sheer expanse of its geography, the complexity of its
sales channels, and the rapid pace of urbanization—which
has created 14 modern metropolises with populations of
more than 10 million and 150+ cities with populations of
more than one million—can all be overwhelming.
Regardless of how and where focus on the more affordable domestic
automakers choose to compete in vehicles. Three groups are highly
China, they will need to address a interested in foreign brands. One, which
diverse mix of values, preferences and we call the “Young Royals,” is keen on
behaviors that influence consumers’ exclusivity and is willing to pay more for
buying decisions. the latest high-end products. The other
two groups comprise lower-income
Several years ago, Accenture identified people who aspire to buy trendier and
major consumer segments in China. sophisticated brands (the “Aspirationals”)
We believe the distinctions among and higher-income men and women (the
these groups are particularly relevant “Established Money”) who also want
in today’s burgeoning auto market. One exclusive products, but value brands that
group is “domestic leaning.” They tend are established and have been in the
to buy Chinese brands either because of market for a long time.2
a feeling of loyalty to their country and
local companies or because their lack
of disposable income forces them to
4
“Nice ride” 5
Figure 2. Although Volkswagen remains the dominant market leader, Chery,
Geely, SAIC, FAW, BAIC, Toyota and Honda are all strongly catching up
Competitive Landscape Development (2013/2020; % CAGR, Unit Increase)
CAGR 2013-2020
Average Unit Increase 310K
17
Fiat Sales Volume
16 2013
150
15
377 Chery 500K
14
13
12 SAIC
Mazda 302
11 435 Geely
10 Hainan Auto.
FAW
9 BAIC
Jianghuai Honda
8 Lifan 464 Toyota Total Market
Daimler BMW
7 Soueast 965 CAGR 6%
725
Brilliance Auto 668 (2013-2020 )
6 Ford 1,014
5 Renault/Nissan
BYD
Dongfeng 1,068
4 Suzuki Jiangling PSA SAIC-GM-Wuling
Great Wall Volkswagen
3 1,440
Changan 3,282
2 Zotye Hyundai 1,504
1 GM Sales Increase
0 2013/2020
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000
European American Korean Chinese Japanese
Source: IHS AutoInsight April 2013; Accenture Research Analysis
While the Chinese market is expanding are following the lead of Hyundai and Telematics services are also playing
to include buyers of second (or even Volkswagen and developing new models an increasingly important role in
third and fourth) vehicles, the majority to meet the Chinese market’s demand Chinese consumers’ vehicle purchasing
of consumers continue to be first- for larger sedans. decisions. By some estimates,
time car-buyers. Of the top 20 models 85 percent of consumers look for
currently being purchased in China, Most auto consumers around the world in-vehicle technologies and 75 percent
Volkswagen accounts for 54 percent of are attracted to tangible, distinguishable acknowledge they would spend more
sales, followed by Hyundai at 19 percent. features such as brand, appearance and for a vehicle with the right telematics
Volkswagen and Hyundai also top the engine performance. This is certainly services. Consumers are particularly
list of the top 20 SUVs sold. Other true in China, where brand prestige— interested in services that provide
manufacturers, however, are catching up even among smaller vehicles—will navigation support and facilitate
and demonstrating a strong projected continue to play an important role in emergency rescue, Wi-Fi connectivity
CAGR over the next seven years purchasing decisions. Several luxury car and access to real-time traffic data.
(see Figure 2). manufacturers are setting up production Accenture estimates that in-vehicle
facilities to be closer to the growing technologies could generate up to $200
At this point, car and SUV bestsellers pool of brand-conscious Chinese buyers. in added revenue per car sold. Such
tend to be “C Compact” models sold For example, in 2013, Audi will begin technologies are now common in luxury
by foreign manufacturers. Yet, many producing its A3 sedan in FAW-VW’s vehicles, and we believe the availability
of these vehicles have wheelbases that Foshan facility. The A3 will be China’s of telematics services will grow
extend to 2.7 meters, which makes first locally sourced compact luxury- quickly in all segments. The challenge
them nearly the size of the typical branded sedan. BMW, Mercedes and for vehicle manufacturers will be to
D-sedan. This reflects a noticeable Jaguar Land Rover are expected to also incorporate the right technologies for a
growing preference for larger vehicles localize production of several vehicles in given vehicle’s price range.
among Chinese consumers, both in the the near future.
sedan and SUV segments. Many OEMs
6
What do you think? 7
Recent Accenture research confirms that when it comes
to deciding which car to buy, Chinese consumers rely
predominantly on four factors: friends and colleagues,
family members, manufacturer websites and social media.
Compared to their global peers, Chinese conducting research online topped Chinese consumers’ prolific use of
consumers are much less likely to simply 90 percent. Like shoppers in other parts social media is particularly important
visit a dealership or order a vehicle of the world, Chinese consumers tend to (see next page). It suggests that auto
from a call center after conducting “research online, purchase offline.” And manufacturers and their dealers may
preliminary research. The car-buying this so-called ROPO effect is growing. be wise to eschew large investments
experience for them is much more In 2010, 33 percent of Chinese in television and radio advertising in
deliberate and involves Web-based consumers purchased products offline favor of establishing a strong social
searches, combined with test-drives at after looking online for pricing, product media presence.5
local dealerships.3 and brand information, as well as for
customer reviews. In 2011, that figure
These findings confirm earlier Accenture jumped to nearly 43 percent.4 While that
research, which found that Chinese research assessed purchasing practices
consumers, in general, are considerably across the consumer goods space, one
more likely to rely on the Internet when can assume a similar phenomenon is
deciding what and whether to buy. occurring in the area of vehicle sales.
In 2012, the proportion of consumers
Four factors influencing Chinese consumers’ car buying decisions
49% 64% 53% 64%
49 percent look to 64 percent seek 53 percent look at 64 percent are
recommendations advice from family manufacturer influenced by
from friends and members. websites. opinions shared via
colleagues. social media.
8
The impact of social media on
consumer behavior in China
Accenture’s 2011 and 2012 Global Consumer
Research studies found that social media is having a
significant effect on Chinese consumers’ purchasing
behaviors:
>90% 60%
More than 90 percent Chinese consumers
use social media and microblogs (known
60 percent interact directly with
companies on social media sites about
as “weibos”) to learn about companies’ their products or customer service.
products or services.
2/3
Two-thirds say that positive or negative
comments have some impact on
their decision to buy a given product.
72%
72 percent Chinese consumers read about
companies’ products or services on social
media sites at least several times a month.
Interestingly, it is not just the opinions of
2/3
friends and family that matter. In 2011,
more than a third of Chinese consumers
based their purchasing decisions, at
least partly, on posts made by complete
strangers. In 2012, that number climbed
to nearly 44 percent.
25%
Nearly 25 percent post their opinions about
a company’s products or services several
Two-thirds think that a company’s
presence on social media sites increases
the likelihood that they will do business
with them.
times a week.
910
Rev your digital engine
Despite their differences in demographics and vehicle
preferences, Chinese consumers share at least one important
characteristic: the expectation for a personalized and
satisfying customer experience. At Accenture, we know
that creating a satisfying end-to-end customer experience
is a hallmark of high performance and an imperative for all
companies, in all markets.
In China, however, the issue is made Upon analyzing the survey findings in
more complicated by rapidly growing greater detail, we found that Chinese
and changing expectations, the high consumers basically want three
influence of others’ experiences (both things when it comes to their digital
positive and negative) on purchasing experience. The first is more access.
behaviors, and the variety of direct and Nearly 80 percent would welcome more
indirect sales channels that are needed mobile-enabled websites. This is hardly
to cover a country and customer base of surprising, given the tremendous rise
such considerable size. When multiple in smartphone and mobile Internet
touch points are employed, the process penetration in China over the past three 84 percent want easier and
of interacting with customers must be years. Manufacturers need to realize clearer pricing to help
seamless and consistent. If it is not, the that mobility has taken hold in China
consumers may well go elsewhere. and will be a driving force in purchasing expedite the car-buying
behavior moving forward. process.
We believe that digital marketing holds
particular promise for automakers The second thing Chinese consumers
looking to build strong consumer want is more content and/or digital
relationships and ultimately sell more features. Large numbers of survey
cars. In fact, we believe the digital respondents indicated their interest in a
channel will soon be the predominant range of digital options. For example:
method of interacting. We are not
the only ones. Some 3,000 Chinese
respondents to a recent Accenture
survey made it clear that they would
like the auto industry to offer a better
and more customized online experience.
More than 80 percent indicated
82 percent are interested in
their desire for more integrated using digital communications
digital marketing experiences from to find out more about new
manufacturer and dealer sites. Even in-vehicle technologies.
more noted that a better interactive
digital marketing capability is “a must”
for the auto industry.
11Finally, consumers in China want a
digital experience that is simple to
navigate. Approximately three-quarters
of respondents noted the need for
simpler digital experiences related to
three distinct activities: information
gathering, vehicle comparisons and
vehicle configurations.
80 percent would like to be 74 percent would like to see OEMs can use these insights to develop
a truly differentiated and customized
able to compare additional more integration with dealer experience for consumers. Opportunities
options within an automaker’s sites and inventory search abound for automakers to use digital
product line. functions. marketing in new ways to strengthen
relationships and brand loyalty. For
example, OEMs and their dealers might
consider making the entire end-to-
end purchasing process—including
financing, price negotiation, back-
office paperwork and home delivery—
available via the online environment.
Approximately one-third of consumers
indicated they would definitely take
advantage of such an option. Another
60 percent said they would consider it.
“Virtual dealerships” that make better
74 percent would like more 70 percent would welcome use of videos or 360-degree tours
intuitive content, customized the ability to chat online with are also a possibility. Approximately
to their preferences. a dealer. 80 percent of consumers noted they
could see themselves buying a car
virtually, without ever visiting
a dealership.
12Enjoy the ride
Over the past 20 years, profound
social, economic and cultural changes
in China have converged to create a
consumer auto market that is unlike
any other.
Complicating matters is the speed at Consumers believe that digital marketing
which it continues to evolve. To win can help align the automaker’s message
the hearts and wallets of Chinese and value proposition with their own
consumers, automakers need to reasons for buying. We agree. When
understand the preferences and insights and digital marketing converge,
behaviors of the consumers they are consumers can take advantage of a car-
hoping to reach. They then need to buying experience that is faster, simpler
translate those consumer insights into and more enjoyable. And automakers
quick action. can more confidently move into the fast
lane of growth, profitability and high
performance.
1314
About Accenture Reference
Accenture is a global management 1. Accenture analysis (based on IHS data).
consulting, technology services and
outsourcing company, with approximately 2. W. Driggs et al., “China Brand
266,000 people serving clients in Opportunities: Where they are and how
more than 120 countries. Combining to make the most of them to achieve high
unparalleled experience, comprehensive performance,” Accenture, 2008.
capabilities across all industries and
business functions, and extensive 3. Accenture survey research, conducted
research on the world’s most successful in association with Coleman Parkes
companies, Accenture collaborates with Research, August-September 2012.
clients to help them become high-
performance businesses and governments. 4. J. Beg et al., “Meet the new Chinese
The company generated net revenues of consumer,” Outlook Magazine (Accenture),
US$27.9 billion for the fiscal year ended 2013(1).
Aug. 31, 2012. Its home page is
5. Neumann et al., “Taming the channel
www.accenture.com.
complexities of the Chinese consumer
market: New challenges, rules and growth
opportunities,” Accenture, 2012.
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