Guest Reporting by: Valerie Beauchamp | Director of Human Experience Strategy, Starcom China.
Contact her at firstname.lastname@example.org.
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.