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New Urban Immigrants Become China’s New Car Consumption Driver
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New Urban Immigrants Become China’s New Car Consumption Driver

Global leading information and measurement company Nielsen released the Report on China’s Emerging Consumer Groups in 2017, which shows that new urban immigrants in cities have become one of the emerging consumer groups in China. The average budget for car owners and future buyers among new urban immigrants is 187,000 yuan. 47% of new urban immigrant car owners have made their car purchase within the past three years, higher than the proportion of car owners among locals[1], which is 43%. With an increase of numbers in this group and their growing monthly income, new urban immigrants are gradually becoming a new force in car purchase in China.

New Urban Immigrants are an emerging consumer group. New urban immigrants are those who come to work or engage in business in a new city and live there for over 2 years and less than 10 years. With China’s quickly urbanizing population, millions of consumers are moving from rural to urban areas, and from the inland small cities to large and medium-sized cities. According to statistics from the National Population and Family Planning Commission, the floating population, meaning the number of Chinese moving to new cities or areas to live or work, will reach 291 million by 2020, and the agricultural population moving from rural to urban areas will reach 220 million. The floating population between cities specifically will reach to about 70 million. These consumers share common features such as family-oriented, settlement-oriented and higher income. Fifty-six percent of the urban immigrants plan to live in their new city for more than five years, suggesting that these urban immigrants will drive demand in years to come.

Olive Zhang, vice-president of Nielsen China, said: “With the accelerated urbanization of China, the income level and purchasing power of urban immigrants has increased significantly. We are seeing high-income and middle-income groups driving demand for new car purchases and urban immigrants have become a new force in within the auto market.

New Urban Immigrant—A Young and Highly-educated Consumer Segment

Nielsen’s study focused on car owners and future car buyers among new urban immigrants and compared them with car owners and future car buyers of locals in cities. According to Nielsen’s data, most new urban immigrants transfer to first-tier or second-tier cities from third or even fourth-tier ones. They are a group of highly-educated young people, most born in 1980s and 1990s. 71% of them are undergraduates or at a higher educational level, and 60% of the new urban immigrants are male. About 64% of the new urban immigrants serve as staff members or managers in companies. They are mostly unmarried or married without children. For 44% of them, the monthly income is mainly concentrated between 5,000 to 20,000 yuan. 33% of them earn less than 5,000 yuan per month.

New Urban Immigrants’ Demands for Cars—Cost-Performance Ratio First

In all, the average budget of car owners and future car buyers among new urban immigrants is 187,000 yuan, slightly lower than the 219,000-yuan budget of non-immigrants. However, the high-income group of new urban immigrants have a higher average budget of 246,000 yuan. At present, 73% of the new urban immigrants hold a driving license; 83% of locals and 83% of high-income immigrants do.

Nielsen’s study found that the main reasons for car purchase of new urban immigrants are the motivations to improve travel convenience (62%) and quality of life (49%) and better financial conditions (33%). While non-immigrants mainly want to experience the pleasure of driving and improve social status through car purchase. Apart from improving travel convenience, the high-income group also choose to buy a new car for traveling outside. They not only pay attention to prices but also highly focus on the control, dynamic performance, space and comfort level. They hope that the car they choose could bring better driving and traveling experience for their family and themselves.

In the purchase process, compared with the proportion within locals, higher figure could be found in new urban immigrants that more of them will choose to look for cars online and test cars in physical stores. 89% of new urban immigrants go to physical stores to see the real cars and 75% will have test drive. At the same time, the information channels for new urban immigrants are the recommendation from their friends and family members.

Nielsen’s study shows that both locals and new urban immigrants choose to pay more attention to the safety, energy-saving and intelligent electronic configuration. For new urban immigrants, the purchase channels they would choose are emerging channels instead of regular brand dealers. They tend to choose car supermarket (47%) and professional media website of cars (45%).

Car Maintenance— Dominance to Equal Shares

Nielsen’s study shows that the average year of use of new immigrants’ cars is 5.3 years. In terms of the maintenance channel, new urban immigrants tend to choose online channels, such as online booking (38%) and third-party platform (24%). As high as 74% of new urban immigrants would like to try online channels but only 56% of locals do. And they have higher expectation for second-hand car residual value with 41% of them thinking that the price of the second-hand car should be more than 50% of that of new cars.

Olive Zhang said: “New urban immigrants have gradually become the backbone force driving new car consumption. The size of their group is expanding and their spending power is also increasing, however they are increasingly sophisticated and rational in their purchases. These new immigrants consider are very careful in choosing cars that meet their specific needs and they are focused on those cars that provide high performance for a reasonable price.”

New urban immigrants are a group of young and hard-working consumers, hoping to lay a solid foundation in first or second-tier cities. New urban immigrants usually put cost-performance ratio first and expect their cars to be efficient and hold a higher residual value. In terms of the purchase channels, new urban immigrants are the target group of online purchase and maintenance.

Note

[1] Local refers to people living in cities for more than 10 years.