Nielsen: Chinese Car Buyers Are Feeling A Little Hungover

July 16, 2010
Traffic in China

Traffic in China

2009 was a year that many would like to forget, and that goes double for the auto industry. In China, however, 2009 was a boom time for car makers -- a year of steep government subsidies, an auto market that saw 45% growth, and a frenzied population of buyers, many of whom still find owning a car a slightly novel and exciting idea.

2010, however, isn't on the same damn-the-torpedoes track. Most of the government subsidies pouring out of Beijing have dried up, sales have slowed, and according to Nielsen's 2010 China Auto Trends Monitor Report, only 32% of the public plan to buy a car within the next 12 months -- down from 53% a year ago. The economic hangover has begun.

Of course, to have roughly one in three Chinese citizens shopping for a car isn't much to sneer at -- certainly not with a population hovering north of the 1.3 billion mark. Even if the auto-buying public were a tenth of that figure and only half followed through with their plans, it would far surpass the U.S. auto market.

However, Chinese consumers are wising up, and they're watching their pennies (well, yuan). The majority may still value exterior styling above comfort, safety, and practicality, but they're cautious when it comes to spending dough: roughly 40% of active shoppers said they planned to spend no more than 80,000 – 120,000 yuan on their next ride, which is about $12,000 to $18,000 U.S.

What's more, few of those vehicles will be hybrids or alternative energy vehicles. Nielsen says that Chinese consumers are, in fact, interested in hybrids and other new-tech, clean-tech cars, but they aren't likely to purchase them until (a) they have a better understanding of the technology behind the cars; (b) they feel that the technology is mature, not experimental; and (c) the Chinese government offers significant subsidies to help pay for these more expensive rides. (On average, Nielsen's respondents said that a subsidy of 30% was fair.) Back in December, we reported that Beijing had plans to subsidize green vehicles for both individuals and public transport fleets, but there's no word on exactly if or when those came to pass or how they've played out in the market.

Our take? At heart, Chinese consumers sound an awful lot like their American counterparts. True, we may have slightly different priorities, but we still share many concerns when we're cruising the lots: is the car affordable, is it a good deal, and in the case of hybrids and EVs, is the technology safe and reliable?

On the other hand, U.S. shoppers are prone to finance their cars, trucks and SUVs, meaning that some Americans end up driving beyond their means. In China, however, over 70% of all buyers pay cash on the barrel and own their cars outright. And while credit isn't bad -- in fact, some argue it's the foundation of a healthy economy -- there's something laudable about free and clear ownership. It may not help China's economy grow as fast as it could with free and easy credit, but it won't put consumers in a credit bind either.


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