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By Guest Reporter, September 3, 2010 11:57 am

Guest Reporting by: Valerie Beauchamp | Director of Human Experience Strategy, Starcom China.
Contact her at valerie.beauchamp@bj.starcommedia.com.

Mark Twain once said “clothes make the man.”  In China, it may be best to adapt that phrase to claim “the car makes the man.”  And not just any car…the luxury car.

Around the world, we have been flooded with the headlines these past 9 months – China has surpassed the US to be the world’s largest auto market, and despite the industry’s challenges in other parts of the world, things seemingly couldn’t be better in China.  Beijing’s Auto China 2010 saw 990 exhibitions from 2,100 auto makers and parts companies, with 89 models making their world debut and 40+ high-end luxury cars sold off the floor…the equivalent of 150 million yuan and $22 million USD being spent in a span of 144 hours.

The Chinese luxury car consumer seems to march to the beat of his own drum, with an unpredictable nature that would rival Emperor Xuan (known for renaming his palace, doubling both the tassels on his crown as well as the number of imperial vehicles, changing the official uniforms and much, much more).

So, what’s behind the momentum?  Or, more importantly…WHO is behind it?

Defining a Luxury Car

In the minds of China’s luxury car buyers – a group who, on average, is 10-15 years younger than luxury buyers in other markets around the world – a true luxury car carries a price tag of at least 1 million RMB ($150,000 USD).  Anything less than that is something they consider an “accessible” luxury car.

But there’s no need to roll down those garage doors and return home if your car is not an Aston Martin or Lamborghini.  In a market with 64 billionaires, six in every 10,000 people having personal assets of $1.5 million or more and a yearly growth of millionaires holding steady at approximately +6%, there are plenty of consumers still interested in adding an “accessible” luxury car to their collection.

What They Want & When They Want It

Chinese luxury car consumers are especially drawn to new models, and the distinction between a minority car (小众车) versus a street car (街车) is a clear and important one; the more unique my car, the more I am publicly expressing my differentiated identity.  This creates an interesting paradox for luxury car companies…the more cars they put on the road in China, the less attractive they are to their ideal consumers.  This consumer mindset also creates incredibly short ownership periods – most Chinese luxury consumers see the life span of a car as 2-4 years, resulting in purchase behaviors that look more like FMCG than they do large ticket items.

A need for instant gratification is prevalent in the luxury car space in China.  When Chinese luxury car consumers decide they want it – they want it now.  Telling the consumer you don’t have a model to test drive or that the vehicle will take 4-6 to arrive will send them right out the door and across the street to a competitor’s dealership.

The Unspoken Rules of the Road

There exists a strong, but subtle understanding that regardless of your purchase, stepping beyond your “position” is a big no-no when purchasing a luxury car.  If your boss drives an Audi A6 (or, more likely, is driven in an extended wheel base Audi A6L – a model developed to cater to China’s chauffer culture), it is best not show up at work in an Audi A8.  If you have a respectable job, a nice house and wife and son, do not make a fool of yourself by driving on the Ji Chang Expressway outside Beijing in a BMW Z4 – unless, of course, you have an X5 at home for those weekend family excursions.

But be aware of the legacy of the luxury car you drive in China…while a Mercedes Benz may convey a sense of nobility & honor and an Audi may connect you to a legacy of government and bureaucracy (Audi remains the primary beneficiary of the Chinese government procurement of official cars), a BMW may tell the world you are nothing more than “nouveau riche” or worse, that you are someone’s mistress.

As the China auto market matures, time will tell if the luxury consumer behaviors will evolve to more closely reflect those of other developed countries.  In the mean time, as competition heats up, and the cars with the higher price tags are reaping the benefits, luxury car brands that can sustain differentiated positioning, offer a highly varied model portfolio and help to reinforce a sense of “arrival” & convey an enviable – but not too showy – status position for their drivers have a promising future in China’s luxury car sector.

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By Angie, April 20, 2010 3:19 pm

Following up on my article about China’s Ant Tribes (click here for a refresher), groups of Chinese youth have become so fed up by the rat race and broken dreams found in Beijing and Shanghai that they are leaving and settling for smaller towns, where they being are offered a cushy start.

While the top tier cities have lured youth with projections of lucrative paychecks, career opportunities and a fast paced lifestyle, many youth are quickly discovering that the reality is nothing like what they had imagined.

Earlier this year, I conducted an in-home interview with a 25-year-old in Shanghai who moved there from his tier 3 city hometown.  Living with his girlfriend in a single room containing only a double bed (that filled 90% of the room) and a computer, their possessions were meager.  Studying in Shanghai was his dream – his first step to becoming a successful graphic designer.  In order to pay rent (and to keep his computer up-to-date) he works at a restaurant every night, including weekends.  “It’s really hard and not what I thought it would be,” he told me, “but I am staying because I have hope that it will get better.”

Youth living & working in Shanghai. Copyright - Starcom 2010

A May 2010 United Nations report stated that from 1980 to 2010, China’s urban population had more than doubled, expanding from 19% of China’s total population to 47%… and growing.

But not everyone is willing to stay and many have given up their big city dreams, seeking their fortunes elsewhere.  One of those places is Ningbo, a port city in eastern Zhejiang province (and home to the handsome beggar!), which will give housing subsidies ranging from 500,000 to 1.5 million yuan to qualified professionals.  Other growing cities like Tianjin, Dalian and Qingdao also offer flexible residency permit policies, which enable access to health care, home purchasing and education.

One reason why young and educated graduates would even consider these cities is because many companies have also discovered their appeal.  For many companies, big cities equal higher operating costs and competition, whereas smaller cities with a developed infrastructure may be just the answer.  For example, Microsoft and Boeing have both set up outsourcing delivery centres in Wuxi, Jiangsu province (a tier 2 city).

Young Chinese professionals

What this means for marketers

With the growth (and expected continued growth) of lower city tier economies – due to the modernization of city infrastructure, their appeal to major companies, and their poaching of professionals and new grads – it is absolutely crucial for marketers to place considerable resources into researching and studying lower city tiers.  We must start looking beyond tier two and three cities and venture into tier four (e.g Quan Zhou 泉州) and even tier five cities (e.g. Shan Tou 汕头).

Also, an influx of sophisticated consumers into lower city tiers may require marketers to re-evaluate their consumer messaging and campaigns, and to consider the dynamics of dual messaging within a single market.

Lower city tiers are an exciting frontier for marketers for its large and untapped consumer base, rising incomes, and consumer aspirations.  Understanding this group – their thoughts and motivations – is the challenge.

Come visit Starcom China Blog again on Thursday, where I will continue our lower city tier discussion and dig deeper into what we have learned about these consumers!

Tier 3 little one and grandfather