The Chinese auto market is undergoing significant changes that hasn’t been experienced ever before. Automakers are facing serious problems like market saturation, fierce competition, as well as brand-new consumer demands. According to the J.D. Power 2019 China New-Vehicle Intender StudySM (NVIS), released on July 4th, intended new-vehicle consumers’ purchase motives, brand preferences, and willingness of owning a car are all gradually changing. Therefore, understanding and responding to changes towards the need of potential car consumers will help automakers cope with an ever-changing market environment.
More Conservative in Car Purchase
The financial level of intended new-vehicle consumers determines their purchasing behavior. The current Chinese economy downturn has exerted certain pressure on national incomes. Paired with the conservative consumer behavior, it has greatly influenced automotive consumption. The NVIS shows that, recently, Chinese consumers have become more conservative in car purchasing. Their car purchase budget has shrunk by 12% to around RMB 215K (USD 31.3K).
Consumers in China are mostly motivated by demands such as making a better life or enjoying driving, which result in owning a new car being an option rather than a must. Together, the tightened purchase budget and the declined repurchase willingness are causing auto sales to become more challenging.
Based on the consumer profiles developed by J.D. Power 2019 China New-Vehicle Intender StudySM (NVIS), there are four typical potential car buyers, and each group has their specific preferences.
High Expectation for In-Vehicle Technologies
As consumers’ understandings of in-vehicle technologies deepen, the “variety of features” is becoming one of the main drivers of purchase. The NVIS shows that the importance of having a variety of in-vehicle technologies has leaped from 11th to 6th when ranking consumers’ vehicle purchasing factors.
Among the many in-vehicle technologies, the top three functions with highest consumer demand are multimedia features: built-in navigation system/GPS, built-in Bluetooth, and built-in internet connection/Wi-Fi. This is closely related to the frequency of their daily use and user scenarios.
Compared with data from the J.D. Power China 2018 Initial Quality StudySM (IQS), customers’ demand of multimedia in-vehicle technologies, e.g. built-in GPS, built-in Bluetooth, have already reached user expectations. However, there is still a certain gap with the assembly rate of popular features such as built-in Wi-Fi, lane-change assist/BSM, built-in night vision camera, and automatic parking system.
The study also shows that when consumers have a budget of over RMB 100K (USD 15K), expectations for in-vehicle features significantly increase. However, this range of budget is difficult to cover most of the in-vehicle technologies or some advanced features. Therefore, Original Equipment Manufacturers (OEMs) need to carefully evaluate the specific needs of customers and provide flexible features options.
Concerns about NEV Reliability and Battery Technology Increase
The 2019 China New-Vehicle Intender StudySM (NVIS) shows that the proportion of intended new vehicle buyers of domestic brands soars and surpasses all other brands. The share of potential vehicle purchasers of most domestic brands has also increased to varying degrees. Although domestic brands are slightly lag behind than other auto brands in terms of quality, performance, and safety, they have grown in terms of style, design, and user experience, creating their own advantages. Nevertheless, due to the large number of domestic brands, the competition within the section is very intense.
In terms of brand image, some new auto companies have established a smart and futuristic-looking brand image. However, due to the late start of brand building, the overall brand image is not clear enough. Overall, in respect of branding, Tesla’s brand image is more successful as it is leading the New Energy Vehicle (NEV) brands.
With less than 10% of consumers who prefer new energy vehicles, NEV brands have not yet become a new market pillar. However, as consumers understand more, new energy vehicles have huge potentials yet to be discovered.
On top of that, research shows that half the consumers’ main purpose for vehicle is for commuting short-distances in urban areas. This is a user scenario where NEVs can cover and have cost advantages. As a result, consumers’ anxiety about the driving range of NEVs is gradually decreasing. NVIS reveals that the concern of “insufficient mileage” by intended vehicle buyers has decreased from 42% in 2018 to 33% now. In addition, with consumers’ deeper understanding of new energy vehicles, consumers are gradually realizing the advantages of new energy vehicles in maintenance, apart from environment friendly, intelligence, and low noise.
However, the frequently reported accidents of NEVs in China have made consumers to be doubtful of the reliability of these products. The concerns of “maturity of new energy technologies” and “reliability of product quality” have increased to 42% (+9%) and 30% (+8%) this year. In addition, due to the expected decline in subsidies for new energy vehicles, subsidies are no longer the focus of demand for NEVs. This moment is a huge test for these NEV manufacturers. Thus, improving consumer confidence and dealing with their concerns are key issues they have to address.
About J.D. Power 2019 China New-Vehicle Intender StudySM (NVIS)
The study, now in its 11th year, examines consumer perceptions of vehicles and the purchase behaviors of those who intend to purchase a new vehicle within the next 12 months. The study also measures purchase decision factors when considering a vehicle for purchase, brand recognition, favorability and impression, as well as consumer interest in new technologies.
The 2019 China New-Vehicle Intender Study is based on responses from 11,977 new-vehicle intenders. The study includes 67 brands and was conducted online in March-April 2019.