The Battle for Automotive Brand Loyalty in China
- Author Mandy Cheung
- Published August 19, 2016
- Word count 596
For the better part of two decades, China has been the global automobile industry’s greatest growth market. Since 2000, sales of passenger, light commercial vehicles, car dvd and android car GPS have increased about tenfold—to more than 20 million units a year—surpassing sales even in the U.S. and representing compound annual growth of about 20 percent.
Now that this golden era of super-fast growth is winding down, the vast Chinese car market is entering a new pivotal stage. Instead of only racing to win over first-time buyers, domestic and foreign automakers alike must secure the loyalty of existing customers. Based on research by The Boston Consulting Group’s Center for Consumer and Customer Insight in China, at least three-quarters of Chinese car owners—representing a massive installed base of more than 90 million vehicles—are planning to switch brands when they purchase their next vehicle or installation of android car stereo. We call this impending shift the "great brand migration."
The reasons for this customer disloyalty vary. A large portion of China’s increasingly affluent consumers want to trade up to higher-quality or more prestigious brands now that they can afford to do so. Millions of others, however, intend to switch to a different car brand within the same segment. Why? When many of these consumers bought their first cars bring with car dvd player, they turned by default to brands they knew. Now, however, they are better informed about their options, and a high number of Chinese drivers are dissatisfied with various aspects of the cars they own.
The findings of BCG interviews with 2,400 car owners in China indicate that Chinese drivers are far more eager to switch brands than average consumers in developed economies. This sentiment, moreover, resounded among owners in every segment—from those driving basic domestic models to owners of pricey luxury vehicles and gm navigation.
Some findings suggest that the next great battle in China’s car market will be waged over customer loyalty. To be sure, China is likely to remain one of the world’s hottest markets for first-time car buyers for the rest of this decade. But success in China will increasingly depend more on automakers’ ability to keep existing customers and to lure customers away from competitors. For companies with a portfolio of car brands across a full range of price points, the ultimate goal should be to build sufficient loyalty in order to win customers and hold on to them as they migrate from lower-priced vehicles to the luxury end—rather than to have to capture these same customers over and over again.
For the handful of automakers that enjoy rock-solid reputations and consumer loyalty in China, the great brand migration of android car GPS is an enormous opportunity to increase share in a still-growing market. Most other car companies, however, must raise their game considerably in order to win the intensifying battle for loyalty.
Domestic brands are under particular pressure as many have been losing market share in China. They must improve their reputations for quality and performance—a daunting task given China’s intense price competition for economy vehicles. But not even multinationals can take their success for granted. The advantages that foreign brands enjoyed among first-time Chinese car buyers are starting to fade as attractive alternatives emerge. Chinese consumers are maturing as car buyers, and they clearly expect better quality, service, performance, car dvd player and android car stereo for their money. For car companies that meet consumer expectations and position their brands correctly, the prize to be won in China is immense.
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