Essay Example: Chinese Consumer Attitudes in Premium Car Segment

Published: 2022-12-02 19:41:23
Essay Example: Chinese Consumer Attitudes in Premium Car Segment
Type of paper:  Literature review
Categories: Automotive industry
Pages: 6
Wordcount: 1435 words
12 min read
143 views

Since 2011 China's automotive market has registered its lowest growth, over the years, the automotive market managed to rebound strongly from 2016. Statistics have shown that car sales have increased by a margin of 20%, nearly double the rate of increase in the year 2015. Majority of this strong expansion resulted from Chinas temporary suspension of sales tax, specifically for motor vehicles with small engines. The significant decrease early in the year reflected the effects of strong "Pull Ahead" sales in December 2016. Thus, most of the consumers wanted to take advantage of the decreased sales tax, in advance before the increase in sales tax took effect in January 2017. Nonetheless, the growth in sales finally picked up again in the course of the year.

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However, the recent revival in sales represents one of the dramatic shifts in Chinas locomotive market, there are other factors which are at play, and they will have a significant impact in the market in the future years. Possibly, the significance of these changes entails the transformation happening among motor vehicle buyers. Evermore, automotive consumers, demand more digital features, and a majority of them are quote unsatisfied and unhappy with traditional dealer experience. Therefore, the growing demand segment of motor vehicle buyers is in one way or another restructuring the car industry.

In order to have a clear understanding of Chinas automobile buyers, and how variations in consumer behavior will influence the future of the auto market, research was conducted in July 2017 (Gao et al., 2016). This research entailed more than 5800 car buyers who purchased cars within that last year. These automobile consumers came from, "44 Tier 1 to 4 cities and seven counties, situated in 19 crucial city groups all over China." Jointly, these groups contribute to 90% of Chinas urban GDP, and also contains half of Chinas population.

VALS (Values and Lifestyles) is an exclusive research practice employed in the psychographic market subdivision. VALS is a way of viewing people on the basis of their attitudes, wants, desires, opinions, and demographics (Gao et al., 2016). There are five key phases in the consumer decision-making process, they include: Need recognition, search for alternatives, recognition of alternatives, purchase, and post-purchase evaluation. The process of consumer decision making starts with the acknowledgment of a need. Once the need is acknowledged and established, the consumer thus becomes motivated to solve the current "problem" recognized. The need has to be activated first before one can recognize it. Numerous factors influence the probability that a certain need will be activated. Some of these factors include; change in consumers desired state or the change in consumer's actual state.

Attitudes in Consumer Behavior

The consumer attitude can be defined as a simple feeling of desire or non-desire that a person has towards a product. It is quite clear that an individual who is optimistic is likely to purchase a product, and this translates to a probability of disliking or liking the product. In addition, consumer attitude includes belief, feeling, and behavioral intentions towards a particular object (Ajzen, 2015). Thus, belief plays an important role for consumers since it can either be negative or positive. Also, consumers have specific feelings towards a certain brand or product. At times, these feelings are created on certain beliefs and in other cases, they are not. On the other hand, behavioral intentions display the consumer's plans with respect to a product. This is some cases is a rational result of feelings and beliefs.

Over the past years, China's economic growth has raised hundreds of millions of Chinese out of insufficiency and resulted in a growth of the middle class. Middle-class households usually have enough revenue to content their basic needs like- food, clothing, and shelter, and they are able to remain with some disposable revenue for extra savings and consumption (Ajzen, 2015). In 2002, the middle class of China was only 4% of its total population. Years later, this number multiplied to 31%, creating over 420 million persons. China's increasing middle class shows a collection of new economic chances, but it also poses important demographic and political trials.

In 2016, Chinas automobile market closes the year with the highest number of sales amounting to about 23 million motor vehicles. Research also reveals that China is the world's largest and the fastest growing automobile market. Though sales should increase by 5% per annum through 2022, thus this will be equivalent to 53% of growth in the global automobile market- which is still a lower share than in past 5 years where China contributed to about 78% of the world's sales growth.

Hence, it is important to note that consumer behavior is a process, during the early stages of its development, researchers referred to the field as "buyer behavior." In China, the middle class is dwarfed in size by the poor working class, and in the upper class lies the wealthy. In spite of the status of China as the world's second powerful economy, the middle class earns way to less than those of the topmost worldwide economies. Nevertheless, the Chinese who are in the middle class consume luxury goods, in growing numbers.

Since 2008 up to 2014, the total of Chinese homes buying luxury products doubled up, powered by growing revenues and better access to luxury goods. As of 2015, the main driver of increases in luxury expenditure has moved from consumers making their first acquisition of luxury goods to incremental spending from prevailing luxury customers. This conversion means that luxury-goods companies need to invest heavily in enhancing loyalty among existing customers instead of recruiting new customers (Smith, 2018).

After years of double-digit progress, China's automobile market is decelerating down. A chilling economy is one of the key influences in the slowing of what is the world's major market for automobiles. Other features like; altering consumer behavior and approaches toward cars are also important. In order to have a better understanding on what China's automobile buyers think and how they behave when making one of the prime acquisitions of their lives, McKinsey undertook an all-encompassing review of over 3,500 consumers in the month of March.

Although the excitement for cars hasn't wholly reduced, this survey demonstrates that Chinese motor vehicle consumers are becoming more real and less status-conscious than before. Half of the consumers surveyed view a car as a basic necessity, rather than the common "status symbols." For consumers in high-tier cities, buying a new car is now just one selection amongst countless for getting around.

Options like buying a used car, leasing or renting, and relying on e-hailing and car-sharing services still have a cumulative demand. Consumers are also pushing automobile dealers for lower prices on motor vehicles. This happens after customers use digital channels to compare the various existent offers (Smith, 2018).

In addition, the changes in consumer attitudes and macroeconomic gales are decelerating growth in China's automobile market. Since 2010 to 2015, motor vehicle sales in China have increased by a margin of 12% every year. Considering out to 2020, nevertheless, it is projected that the automobile market will grow by an average of 5% a year.

Even though the rate of growth in the general new-car market is declining, the survey shows consumer segments, which might arise as new engines of development in China's automobile market. More than half of consumers seek to advance to an improved product when they purchase their next vehicle. A large number of electric vehicle (EV) owners are profound to buy EVs once more, and the percentage of consumers who say they have an interest in purchasing EV automobiles has increased since 2011. As consumers have begun buying motor vehicles online, this trend that is likely to fast-track as digital networks are improved. There is hopeful growth prospective for automobile-services enterprises that are able to provide the repairs and improvement preferences that customer's desire on a day to day basis. In spite of the decelerating growth in China's vehicle market, a large number of individuals are ready to buy new cars and recompense for the after-sales services. In this report, it is explained how consumers' attitudes toward cars are developing.


Reference

Gao, P., Sha, S., Zipser, D., & Baan, W. (2016). Finding the fast lane: Emerging trends in China's auto market. survey, McKinsey & Company. Accessed on 11th March 2019 from https://www. mckinsey. com/industries/automotive-and-assembly/our-insights/finding-the-fast-lane-emerging-trends-in-chinas-auto-market.

Smith, S. E. (2018). Heritage with a High Price Tag: The Rise of China's Luxury Automotive Industry (Doctoral dissertation, Duke University Durham).

Ajzen, I. (2015). Consumer attitudes and behavior: the theory of planned behavior applied to food consumption decisions. Italian Review of Agricultural Economics, 70(2), 121-138.

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