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Nielsen: Responding To Changing Consumers’ Needs Key To The Future Growth of Chinese Homegrown Automotive Brands

Contact:
Sue Feng, [email protected], 010-5912-9195

Product Safety, Quality Most Important For Chinese Automobile Buyers
First-time buyers show stronger interest in Chinese homegrown brands
Young consumers have stronger emotional attachment to homegrown brands
Emerging overseas market cannot be ignored

Changchun – September 5, 2013 – Amid an overall slowed growth rate of Chinese automobile market and more fierce competition for Chinese homegrown brands from JV and foreign counterparts, a new report by Nielsen, a leading global provider of information and insights into what consumers watch and buy, identifies key strategies essential for Chinese automobile companies to re-invigorate and better connect with Chinese consumers.

Chinese homegrown automobile brands face competitive environment

According to the report entitled “Consumer Insights on Chinese Homegrown Automotive Brands”, German brands enjoy 68 percent of the respondents’ preference, followed by Japanese brands (13 %). Chinese brands rank third by winning the favor of 11 percent of respondents, followed by American brands (6%), South Korean brands (2%), French and other brands (1%).

“Consumer attitudes toward the country origin of brand indicate a growing challenge worth the attention of Chinese homegrown brands. Compared with foreign brands, Chinese brands still enjoy an advantage edge over international brands by offering lower cost for more benefits, but the situation becomes tougher nowadays when many international brands are trying to price down for a bigger slice of market share,” said Yan Xuan, president of Nielsen Greater China.

According to the latest statistics by the Chinese Association of Automobile Manufacturers, the sales of Chinese homegrown-brand passenger cars in July slumped 17.3 percent compared with that in June, with its market share dropping to the lowest point of 35.2 percent since 2008.

Product safety, quality most important to convert potential buyers into actual buyers

According to the report, for those who are always in favor of foreign brands, “Five-Star Performance in C-NCAP Test” (56%), “more discount from the manufacturer” (54%) and “extension of warranty” (51%) are the top three pre-conditions a Chinese brand car must satisfy for buyers to consider purchase. “Overseas market entry type approval” (32%), and “buy-back guarantee from car makers” (25%) are also considered essential factors, according to the report.

The report also shows that for potential Chinese brand buyers, safety-related technologies, such as protective safety systems (64%), proactive safety systems (57%) and braking systems (55%) are the top three electronic features they pay the utmost attention to. In addition, half of them value the advanced engine technologies such as high-compression ratio engines (66%), gasoline direct injection (64%) and Turbo-charged engines (61%).

“Though there is a certain gap of core competency against international brands, if more efforts can be given to technology innovation, and to the promotion of their competency of safety and powertrain technologies, Chinese homegrown brands will have more opportunities to convert potential buyers into actual buyers in the future,” said Alice Yu, vice president of Nielsen China.

Emphasis on first-time buyers, lower-tier consumers

According to the report, German brands top the list as the most-preferred brands among both first-time buyers (55%) and re-purchasers (80%). Chinese brands are more welcomed among the first-time buyers by winning 17 percent of respondents’ favor (only 5% among re-purchasers), just behind German brands, and one percentage point higher than Japanese brands. For re-purchase car buyers, however, Japanese brands rank second as their favorite car brands (10%) and Chinese brands rank third.

“Compared with Tier 1 and Tier 2 cities, lower-tier cities will be the opportunity market for Chinese auto brands,” said Yan Xuan. According to Nielsen’s recently-released Chinese Automotive Consumer White Paper, 68 percent of China’s total number of potential automotive buyers in the next 12 months comes from Tier 3 and Tier 4 consumers, and of these 68 percent of potential buyers, 56 percent are first-time buyers.

Building a brand image that resonates with consumers’ emotional, functional needs

Compared with the comparatively simple brand image of Chinese automobile brands among Chinese consumers, which is mainly focused on being practical (37%) and young (28%), the report shows that many foreign brands, instead, are perceived with a diversity of images among the respondents participated in the survey.

German brands are seen as reliable, grand and masculine, while American brands are perceived as being sporty, advanced, elegant, comfortable, and with driving pleasure. And the impression of Japanese brands among respondents is one of being exquisite, streamlining, modern and fashionable.

Meanwhile, the survey also indicated a difference between the elder (born before 1970) and younger generation (born after 1970, also called X and Y Generation) in their feeling toward the Chinese brands. While the consumers born before 1970 pay more attention to its image of being fashionable (17% vs. 12% for the younger), exquisite (11% vs. 8% for the younger) and masculine(10% vs. 7% for the younger), the younger generation born after 1970 give more emphasis on being “individual” (18% vs. 14% for the elderly), “unique”(16% vs. 10% for the elderly) and “comfortable” (14% vs. 9% for the elderly).

“The building of brand image should be based on the segmentation of the Chinese automotive consumers, whether men or women, younger generation or elderly,” said Yu. “Only by listening to the specific emotional and functional needs of your consumers will the further-enriched Chinese automobile brand build a closer connection with their future consumers.”.

Eyeing the wide global market

In the backdrop of a slowdown of the overall growth of Chinese automobile market, Nielsen’s “Consumer Insights on Chinese Automotive Brands” report indicates the Chinese automobile brands should keep an eye on the wide global market, especially the emerging markets from BRIC countries, for a sustainable growth in the future.

According to the report, except for China, the total car sales in the other four BRIC countries makes up 13.6 percent of the total sales in volume worldwide, and accounts for nearly 20 percent of the total new market demand around the world.

Nielsen’s report shows that the consumer behavior among these emerging markets could be drastically different. Take Brazil and Russia, for instance — while price and fuel efficiency tops the factors in the car’s decision-making process for Brazilians, Russians give top priority to the car’s reliability and product quality. Brazilians are open to choosing a vehicle regardless of how familiar they are with the brand; Russians, on the other hand, show strong preference to German and Japanese brands. Eleven percent of Russian consumers expressed their interest in Chinese automobile brands.

“A better understanding of different consumer behaviors of each of these target foreign markets is the key to the success in the Chinese brand’s efforts to go out,” said Yan Xuan. “We believe an overall elevation of the Chinese brand’s image and value will build up a solid foundation for its strategic transformation, making it a recognized and trusted brand in the overseas market.”

About the Survey:
The report, “Consumer Insights on Chinese Homegrown Automotive Brand”, is based on a survey of 1,800 automotive consumers from 16 all tier cities across China in April 2013, including 600 face-to-face interviews and 1,200 interviews online. The respondents who participated in the interview were all aged between 20-55, including both the current car owners and potential car buyers who planned to purchase a car in the next 12 months.

About Nielsen
Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence and mobile measurement. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA, and Diemen, the Netherlands. For more information, visit www.nielsen.com.