New city immigrants and consumers from China’s middle-western and southern regions and fourth tier cities and ts report high auto consumption demand
Electric and hybrid cars are more acceptable to Chinese consumers
Throughout 2015, auto markets in developed countries outperformed that of developing countries in terms of sales growth. According to media reports, global auto markets’ sales only increased by 2% year-on-year, the lowest growth rate since 2009. Although China continued topping the charts in terms of sales volumes, its annual growth rate only reached 4.7%. In BRICS countries, with the exception of China, the other four countries have witnessed a sales volume decline due to economic slowdown. However, in contrast, developed countries are recovering from financial crisis. European new car sales have gone up by 9.3% year-on-year, the United States also saw 6% year-on-year growth.
Against such background, Nielsen recently released the “2016 Global and China Auto Consumption Trend White Paper”, to find out future market development trends and opportunities for global auto manufacturers asChina’s economy adjusts to the “new normal”.
The survey is based on Nielsen’s global consumer confidence research and automobile demand research, polled more than 30,000 consumers in 60 countries across Asia-Pacific, Europe, Latin America, the Middle East, Africa and North America, as well as big data analysis from 40,000 consumers’ survey data throughout 20 cities in China.
Nielsen’s 2015 Global Consumer Confidence Index found that people’s willingness to spend in most of emerging marketing wasn’t affected by slower economic growth. Although the expectation of an economic decline has expanded from Western market to the Asian Pacific and Latin American markets, consumer confidence still remains robust for the fourth quarter of 2015 in India, Philippines, Indonesia, Thailand, Vietnam, China and Pakistan, which is above 103, much higher than the world average 97. The Consumer Confidence Index in Mexico, Thailand and Vietnam has significantly jumped by 3% to 5%.
Nielsen graded and ranked the automobile market’s potential in emerging countries according to 7 factors comprised of overall demand potential, competition pressure, legislation environment, trade policies, technology gap, product match level, and supporting facilities. Among them, Brazil, India, Chile, Colombia, Iran, and Indonesia are in the first group with 4 points in the ranking. Egypt, Peru, and Russia are in the second group with 3 points.
“Some emerging markets have encountered temporary economic fluctuations during the industrial structure transformation, but it didn’t negatively affect consumers’ desire to purchase cars,” said Yan Xuan, president of Nielsen Greater China. “We found that in those countries, car ownership is less than 100 units per thousand people; 70% of respondents indicated their intentions to buy a brand new or second-handed car within the next two years in Latin America, Middle East, and Asian Pacific. In the long run, those emerging countries have optimistic growth prospects.”
In addition, the worldwide consumers’ behaviors are changing significantly as well. There are ever-growing middle class, young generation, mobile and connected consumers constituting the current consumers demographics. Nielsen data showed that in emerging countries there are 17% of the consumers aged from 18 to 29 are planning to buy cars, which is higher than 16% of the consumers aged from 30 to 45 and 14% of the consumers aged from 46 to 55. Among them, China, Saudi Arabic, Mexico, and Brazil top the list, with correspondingly 26%, 25%, 22% and 19% of the consumers planning to purchase vehicles.
At the same time, Nielsen survey finds that consumers’ demand for automobiles is also changing, with high-end, compact, intelligent cars becoming more popular. The incentives to buy cars are varied among consumers, with vehicle upgrade and first- time purchases being the most common reasons. In Asia Pacific and Latin America, 93% and 92% of potential car owners want to upgrade or repurchase cars when their financial situation improves, higher than that in Western markets. Those considerations also boosted demand for high-end vehicles.
For the last year, Chongqing, Guizhou, Hunan and Hubei have witnessed robust economy growth, which pushed up auto sales volume. The sales growth rate in Guangdong and Guangxi are above the national average level as well. In these areas, new car sales are mainly from third tier cities or below. The Nielsen survey shows that 18% of respondents intend to buy new cars in the future 12 months. The figure rose to 20% in fourth tier cities.
As the urbanization drive in China goes on, the country has seen a significant percentage of the population moving from the countryside to cities: 10% to 20% of total population in local cities. When those new city immigrants become settled and wealthier, they will consider buying cars.
Nielsen found Chinese consumers are accepting of the forward-looking technologies. About 8% of the respondents said they would like to buy electric cars, which was less than 1% in 2012. The rate of people’s willingness to buy hybrid cars has also jumped to 14% from 2% in 2012. Although most of the consumers were not familiar with smart cars (76%), 23% of them showed interest in possessing one and 15% are very interested.
Nielsen found that the consumers who are more willing to try new energy and smart cars were initially from mega cities like Beijing, Shanghai, Guangzhou and Shenzhen or the second tier cities from central and western provinces. The majority of them have a household annual income between 80,000 to 500,000 yuan.
“It’s not easy to target the precise consumer group for the next generation of vehicles. They might be just next to us, but we are not aware yet,” said Xuan. “We can’t simply define them by interviewing polls and Internet tagging. We should rely on the detailed insights from big data analysis to precisely lock down the consumer group.”