Who could have imagined? Ten years ago, the only automobiles seen on the streets of coastal cities were non-descript black sedans and shoddy Volkswagen Jetta taxis. Today, China's highways are overflowing with cars of every shape, size and color. While foreign brands still dominate the market -- with many produced on the mainland -- local manufacturers such as Geely are coming on strong, particularly in lower-tier markets. Throughout the Middle Kingdom, approximately 20 million passenger cars are sold every year. In Beijing, one household out of three has bought an automobile.
Auto ownership, perhaps not unexpectedly but still remarkably, has become a rite of passage into the hallowed ranks of the middle class. Although a home mortgage is still the sine qua non of landing a wife, Chinese men face a new imperative: you can't say you've made it unless you have a car. (A slick smartphone - hello, iPhone! -- ranks third on the list of "badged necessities.")
China: Not Car Friendly? The ardor of China's love affair with cars was not statistically ordained. In many respects, the country is not car-friendly. Ultra-aggressive Kamikaze drivers are a pervasive menace. Import tariffs are prohibitive. By developed market standards, incomes are pinched; buyers spend approximately 120% of (declared) yearly income on their first vehicle, versus ratios of 30%-40% in the West. (Most enter the market when salary passes the 10,000 RMB-per-month threshold, or approximately $45,000 per year on a purchase power parity basis.) In Tier I cities, plate fees cost an additional $5,000. Cars are not a necessity; in a land of single children, there are no soccer moms. The subway and pubic transportation system is increasingly robust; Shanghai's metro is now the most expansive in the world. And, what's more, maintaining a car is a hassle. Parking spaces are far and few in between. Highways are choked with bumper-to-bumper traffic. Even car washes are rare.
Still, people buy. The question is, "Why?"
Status is King. Of course, "convenience" is a key factor. More professionals, driven by rising real estate prices, are buying homes far from city centers, so automobiles can be practical. But functional needs drive purchase of local brands. The spectacular growth of brands commanding price premiums is underpinned by a basic Chinese instinct: an unquenchable thirst for status. China's "unifying conflict," the tension between upward ambition and hierarchical regimentation, mandates members of the new elite proclaim their position on a ladder of success. Cars are ideal "status projectors," given their large out-of-pocket expense and inherent conspicuity. (More subtly, the driving experience -- a surge of forward momentum -- delivers an elusive sense of "control.") In a country obsessed with "face," the currency of forward advancement, cars are also "investments" in the future. They generate respect. They open doors.
The need to project king-of-the-jungle authority explains why auto benefits are "externalized"; cars are positioned, directly or indirectly, as vessels of professional progression. The visceral thrill of sports cars is a secondary urge. Mazda's "Zoom Zoom!" campaign has been adulterated to incorporate public admiration cues. Even BMW, known in the West as a "driving machine," has fused Western "internal satisfaction" with a quintessentially Chinese "more room to grow" payoff. Audi 8 appeals to men who are "masters" of the commercial landscape or "connoisseurs" of true quality. Even lower-priced cars resort to identity affirmation or social standing reinforcement. Ford Fiesta appeals to post-80s types who were "born bold, born sexy." Mid-tier Volkswagen Passat employs spokesman Jiang Wen, an iconic film director, who declares, "The powerful can change a generation."
The instinct to project status also accounts for some of the market's more peculiar characteristics. Cars here are huge. SUVs such as Honda's CRV, BMW's X3 and X5, and Audi's Q5 and Q7 are popular despite high price and lack of interest in off-road adventurism. "Three box" models (i.e., sedans) outsell sporty "two box" formats. Roomy back seats are de rigeur for aspiring CEOs who must, one day, hire a chauffeur. Online "car clubs" -- sites on which legions of men wax poetic about "mechanical second wives" - pervade cyberspace. (According to CIC, China's leading digital tracker, the auto category is the leading source of internet "buzz.") To boot, the primacy of status projection explains the dearth of drive-through fast food joints, fixation with vehicle personalization, a surfeit of gaudy decals, "lucky man" license plate numbers and tchotchke zoos on dashboards.
Buyer Anxiety. Yes, in China, cars and identity are inextricable. But marketers must avoid monomaniacal status-driven sells. Middle class buying instincts are polarized between bold ego magnification and insecure protection. For every RMB "invested" in advancement, two are put aside for rainy days. Disposable income is constrained, in absolute terms, by low wages. Gun-shy spending and sky-high savings rates are reinforced by: a tattered welfare net; a health care system driven by red envelops slipped in pockets of underpaid doctors; exorbitant education fees; real estate that, relative to income, is amongst the most expensive in the world; an overregulated financial-services market that precludes rational return; and a political system in which economic interests remain neither protected nor represented. Across China's Darwinian economic landscape, the outlay required for a car is, to say the least, a very risky proposition.
How to Reassure. Auto manufacturers must root brands in projective and protective benefits. The dealership experience, in particular, is critical in addressing both needs. Regarding the former, the sales force must treat prospective customers as visiting royalty. Premiums should be offered as testaments of appreciation; vintage red wines and Mont Blanc pens scream "respect." Wives and children who accompany fathers to showrooms must be pampered as queens and princelings.
Status fixation, however, is often trumped by anxiety. To mitigate last-minute jitters, marketers must make buyers feel secure. Here are a few ways of closing the deal:
First, present the brand as global leader with unmatched scale, a critical reassurance point for first-time buyers and consumers in non-coastal cities. Name plates should be "stretched" across price tiers to brand heft. (Warning: care must be taken to avoid image degradation of premium lines, usually via skillful deployment of sub-brands. Buick's efforts in this respect have been masterful, as have Audi's.) Heritage claims buttress perceptions of scale, as do frequent mid-cycle innovations and product upgrades.
Second, focus on fuel efficiency and safety standards as tactical -- not primary -- messages. Ford's Mondeo Eco-boost hits the sweet spot of desire by seamlessly fusing engine power with impressive mileage claims. Dealership agents should be guardian angels, obsessed with the safety of papa bear's cherished dumplings. On-site brochures must highlight anti-skid brake systems, whiplash-resistant airbags, any features linked to "control of the road."
Third, service guarantees must be iron clad, presented as a gold-plated certificate of reassurance. Throughout an extended warranty period (and beyond), dealerships should promise 48-hour repairs. Supply chains and inventories must be reconfigured to minimize shortage of parts, all of which must be available within 24 hours. More ambitiously, in geographies requiring long travel to service centers, parts can be "brought to the driver."
In conclusion, the Middle Kingdom auto market is booming. For China's ambitious middle class, big cars and big egos go hand in hand. However, given the insecurity of a skittish new elite, brands must both project status and protect interests, both physical and economic. This pivot requires flexibility and focus.