Consumers welcome price subsidy and expect more policy benefits on NEV usage;
Plug-in HEV has higher consumer interest and growth potential
NEV early adopters come from Urban Moderns in Tier 1 cities and Young Savers in Tier 2/3 cities;
Recharge facility, maintenance cost and longer warranty top consumers’ service expectation list
August 11, 2015, Beijing — For the fourth consecutive year, Nielsen and China Association of Auto Manufacturers (CAAM) have jointly published the “China Auto Consumer Insights White Paper” and shared findings today during a press conference. The findings are based on a nationwide survey of 700 consumers who own cars or have purchase intentions across different vehicle segments and city tiers this April. Consumer demand on new energy vehicles and derivative body type are major content of this survey to identify the emerging trends.
The conventional Chinese auto market saw only 1.4% growth over last year according to CAAM statistics. In contrast, new energy vehicle (NEV) sales reach a record high of 2.4 times last year’s findings. Among total 72,711 NEV sales, battery electric vehicle (BEV) volume accounts for 64%, 2.9 times higher this year, and plug-in hybrid electric vehicles (PHEV) come in at 36%, 1.9 times higher. Hitting the record high volume, 2015 will be a milestone year when moving the tour to the government target of 500,000 cumulative NEV sales in 2015 and 5 Million by 2020.
“Since 2011, the China auto market has entered a New Normal flanked by a slow-down in yearly growth from 24% to 6.8%. This is on par with the overall economy and GDP fluctuation. The new energy vehicle market on the other hand is moving form the demonstration stage to the growth stage, that’s why we see faster volume growth over conventional vehicles. China has the potential to be the world largest electric car market, an integral part of New Normal Stage I have described,” said Dong Yang, Vice Chairman and Chief Secretary of China Association of Auto Manufacturers.
Shanghai was the first city to execute the car plate purchase quota policy in 1994. Since then, seven more Tier 1 and 2 cities including Beijing, Guiyang, Guangzhou, Tianjin, Hangzhou, Shijiazhuang and Shenzhen have implemented the strategy, and more cities are in the queue. The policy was enacted to curb increased traffic congestion and air pollution problems.
Although 51% respondents don’t think the policy influences their purchase plan, the car plate quota policy is changing consumers’ purchase plans and behavior. 16% of all respondents will consider buying a new energy vehicle, 13% will pull ahead their purchase plan while 11% plan to postpone their purchase plan. There are some other consumers considering buying a different sized car (7%) or using the license plate from the adjacent province (7%).
During the first half of 2015, there were more than 10 NEV-related policy and industry standards being published or executed. Coverage of NEV demonstration cities rose to 89, and the price subsidy for personal buyers was being expanded gradually. Despite that, consumer awareness of the subsidy policy is not high enough. According to Nielsen survey, overall awareness of subsidy policy is 54%, only three Tier 1 cities (Shanghai, Beijing, Shenzhen) are above the average, while the rest of research cities such as Chengdu, Guiyang and Hangzhou range from 16% to 28%.
Consumers’ knowledge of the subsidy policy has positive impact on their purchase intentions. As far as the mass brand consumers, NEV purchase consideration is 57% among those who are aware of subsidy policy, and only 38% among those who are unware.
Between two major NEV technologies, BEV maintains the volume leadership with double the PHEV growth. Considering the government advocacy and higher price subsidy, China car manufacturers are actively developing and launching BEVs while commercializing very few PHEVs. With both product and marketing efforts, BEV enjoys much higher awareness (72%) than PHEV (48%). Despite that, PHEV saw higher purchase intention (14%) than BEV (8%) out of those who knew about those technologies.
Nielsen China Auto Vertical Director, Jeffrey Zhao said, “Disunity between volume share and mind share of BEV versus PHEV is quite interesting. It appears PHEV is more appealing to Chinese consumers for reason of longer range capacity and less dependence on recharge facilities. It signaled unmet needs for PHEVs and is worth car manufacturers’ attention especially when EV market is changing from policy driven to demand driven.”
Another interesting finding is Chinese consumers have stronger desire for derivative body types than the sedan. The Nielsen survey indicates Sedan (88%), 5 seat SUV (76%) and hatchback (45%) top the car shoppers’ consideration list. In addition, 31% of total respondents would consider buying a 7 seat SUV and 27% intend to purchase a 5 seat MPV. The data suggests that manufacturers might apply alternative fuel powertrain options to a variety of body types in the future and not just sedans.
Similar to the previous survey results, short driving distance, long recharging time and few maintenance locations are the top 3 rejection reasons for NEVs. Consumers are not prepared to substantially sacrifice their travel range capacity and wait time at recharge stations when trying the new technology. Maximum travel range after the full charge is expected to be 268km on average for BEV. This is much higher than actual travel range capacity for the of majority of BEVs, which is 150km-200km. Average time to charge for BEV is expected to be 4.7 hours for full charge and 0.39 hours for fast-charge. However, most of products in market take 6-8 hours for full charge and 0.5-0.8 hours for fast-charge.
Shortage of after-sales and maintenance service is another pain point for NEV intenders. They are looking for more recharging facilities (49%), reasonable maintenance cost (48%), longer warranty (45%), sufficient/cost efficient part supply (42%) and free battery check and replacement (38%) for after-sales assurance.
“Consumers’ unmet needs in product and service are challenges to NEV manufacturers, but it is also an opportunity for cross sector collaboration,” said Zhao. “Buying an electric car is more than an one off deal, it is about total ownership cost. Every stakeholder in the NEV’s ecosystem will benefit from the consumer’s commitment in the form of parts supply, vehicle sales, leasing, battery and facility rental, power charging, as well as maintenance service.”
The survey indicates both PHEV and BEV intenders share a common attitude toward alternative fuel technologies. They believe NEV are an inevitable trend and enhance their personal image. They are also curious about innovative technologies and like trying them. There is some variation in demographics between PHEV and BEV enthusiasts. Among four consumer segments, Trendy Elites from Tier 1 cities are more interested in PHEV, who are mostly 35-39, hoping to lead the fashion of technology and enhance personal image. Young Savers from Tier 2 and 3 cities are more interested in BEV. They are mostly 25-34, male and low income, but they have a stronger desire of environmental care and energy saving.
“One important aspect of the Chinese New Normal is the evolution from a resource driven market to an innovation driven market. The Chinese auto industry is closing the gap with developed markets now. Our manufacturers share the same innovation agenda as their international peers—electrification, information technology and connected car capabilities. Chinese homegrown brands must move in parallel with independent innovation and overseas technology transfer. It will bring them a bright future for taking NEV market leadership in China,” Dong Yang.
Nielsen N.V. (NYSE: NLSN) is a global performance management company that provides a comprehensive understanding of what consumers Watch and Buy. Nielsen’s Watch segment provides media and advertising clients with Total Audience measurement services across all devices where content—video, audio and text—is consumed. The Buy segment offers consumer packaged goods manufacturers and retailers the industry’s only global view of retail performance measurement. By integrating information from its Watch and Buy segments and other data sources, Nielsen provides its clients with both world-class measurement as well as analytics that help improve performance. Nielsen, an S&P 500 company, has operations in over 100 countries that cover more than 90% of the world’s population. For more information, visit www.nielsen.com.
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