China's New Car Market: People Who Already Have One
So far, auto marketers and market analysts have focused on the more than a billion people in China who do not have a car. This will remain a lucrative target for a long time. China Economic Daily has identified another attractive target group. People who already have a car.
In 2003, private mass motorization in China began in earnest. In three years, the number of private vehicles on China’s roads jumped from 9.69m units in 2002 to 18.52m units by the end of 2005. These cars are liable to be exchanged for new now, especially in a time when lavish discounts are given to keep utilization of rapidly expanding capacities up.
The first car boomer generation swapping their old ones for new ones adds to the masses of Chinese who never owned a car.
The used car market is still quite small compare to the new car market: 1.1m used cars were sold out from January to April this year in China, up 12.85 percent. Market observers see the used car market, still in its infancy in China, to rise dramatically over the next years, as it become fueled by trade-ins. d This will deliver an attractive entry proposition for less well heeled customers.
China’s cash for clunkers program (or “old-for-new” as it is called here) was a dud. The subsidies and the number of eligible cars were too low. Both has been changed this year. Since May, old-for-new deals ar 18 times that before policy adjustment. 2,758 vehicles get subsidies everyday.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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Is that an Aveo with wood trim in the photo?
Nah, the car boom in China will end soon, as folks realize the economy and social justice in mass transit, and the environmental benefits of bicycles.
Bertel, Any idea what motivates the Chinese consumer to trade in a car? Are consumers most interested in the fashion/status aspect of a new car, replacing a worn car, or utility of a larger car to transport a growing family?
Bertel - You've mentioned before that the Chinese in general are finance-averse, and like to pay for their cars in cash. Granted, cars are a lot cheaper in China than in the US, but the average income is also a lot lower. Are these second car buyers now turning to finance, are they somehow able to save up the money to pay cash for a new car over a few years, or do many Chinese families simply have huge nest eggs they've been sitting on due to the previous lack of expensive consumer goods to spend it on?