Foreign auto makers change sales strategies as buyers wait

Updated: 2013-11-27 11:41

By Michael Barris in New York (China Daily USA)

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Car shoppers in China are waiting up to 40 percent longer than a year ago to buy a vehicle, forcing foreign auto makers to revamp their sales strategies, according to a market research firm's study.

"The China of the past where hungry first-time buyers dominated the market is gone," TNS Global Development Director Andy Turton said in a statement released with the study on Wednesday. "The balance of power has shifted into shoppers' hands and they know it."

The study found that although more than 41 percent of Chinese auto buyers surveyed typically reach a decision to buy quickly, last year's price war on high-end vehicles, and particularly on popular luxury brand SUVs, led many to buy more slowly than they "naturally prefer".

TNS's report - "The Automotive Path to Purchase Study" - also warns international car companies not to discount prices too heavily lest they be seen as bargain brands, which would hurt their credibility with status-conscious Chinese shoppers.

"Some international car companies have really struggled in China due to an over-reliance on deals and promotions, despite having strong equity in the West," Turton said. "Yet brands that can get this balance right are in a powerful position to shift their sales into the fast lane."

The study, conducted among 1,000 consumers across 184 cities in China from November 2012 to February, assessed how brands can influence buyers at different stages of the buying process through a range of media channels.

It underlined buyers' increasing willingness to wait for good deals because they can choose from among 379 car brands in China, up from 64 a decade ago.

China overtook the US in 2009 as the biggest auto market in the world by sales volume. Asian countries, especially China and India, are expected to account for 40 percent of auto industry growth in the next five to seven years.

The study found that more than three-quarters of buyers in the country were prompted to buy a car by a special deal or promotion, compared with 39 percent in 2012. An increasing range of sources are influencing shoppers' decisions, including social media, blogs, car dealers, friends and family, according to the study.

Only one in 10 in China eventually bought the car they had in mind at the start of their search, according to the study.

Many buyers "realize that playing the waiting game will lead to a better offer in the long run", the report said.

Turton said global automakers need to provide "clear and consistent messages across a much broader range of different media channels to convince these super bargain hunters to part with their cash". The communication methods could include TV ads, social media or independent blogs and automotive websites.

The China Association of Automotive Manufacturers expects automobile sales in China to surpass 20 million units for the first time this year, amid a recovering economy and lower prices, along with increasing demand in unsaturated smaller cities. A report on the Zacks Equity Research website said prospective buyers "are trying not to delay their purchase due to the possibility of increased regulations on new vehicle registration in Beijing".

Ford Motor Corp has said it expects growth in Asia - mainly China and India - to boost global sales by 50 percent to 8 million vehicles by 2015. By that time, Ford also will have introduced 15 models, tripling its product line. The company opened a new assembly plant in China in collaboration with Jiangling Motors Corp in June, doubling production capacity in the country.

General Motors Co, the largest foreign automaker in China, has announced it will increase annual production capacity in China to 5 million vehicles and triple its exports from Chinese plants by 2015. In April, the company revealed plans to build four plants in the country to boost capacity. GM and its joint venture partners in China plan to invest $11 billion in the country by 2016 and launch about 17 new and upgraded car models as part of their major expansion program.

(China Daily USA 11/27/2013 page1)