As Chinese consumers begin filtering into the Shanghai Auto Show this week, their desires and intentions are being dissected in every possible way by auto brands from around the globe that don't want to blow it in the world's largest auto market.
Behind the phalanx of new sheet metal, new brands, larger and more luxurious vehicles than before and, of course, ubiquitous, western-style fashion models adorning the platforms where the cars are displayed, European, American, Korean, Japanese and domestic Chinese brands are grappling with various approaches to a handful of key issues about the market in China.
China sold more than 19 million vehicles last year and is on track for almost 21 million this year. The market already has left the previous largest global market, the United States, in the dust—sales expectations for the US are for only 15 million sold in what is expected to be the best market in a decade.
The question is about the future rate of growth of China sales, which have cooled markedly over the last couple of years compared with the several years before. GM has been saying this week that it expects the China market to grow to 35 million by 2022, or nearly doubling, while Ford executives have predicted sales will rise to 30 million cars and trucks by 2020. Will sales continue to purr along for a while at the recent, somewhat cooler rate, before heating up again a few years hence?
Bigger is better?
Every brand seems to be of the conviction these days that mainstream Chinese consumers want to buy bigger and better-appointed vehicles nowadays. There have been a lot of SUV introductions and launches at the Shanghai show, and most brands are looking for ways to cater to this major change in the market.
"Our focus is on luxury vehicles and SUVs going forward," Bob Socia, president of GM China, told the New York Times. GM brought a record 53 production and concept vehicles to the Shanghai show, according to Forbes.com, to demonstrate to Chinese consumers exactly what he means.
The face of luxury
German brands dominate the Chinese luxury market as surely as they do the European. While Audi remains the luxury-segment leader (just as sibling Volkswagen fights with GM for mainstream-market volume leadership) in Japan, BMW and Mercedes-Benz appear just as determined. Now Cadillac is getting more serious about China, and Ford has introduced the Lincoln brand.
They're all looking at a changing dynamic in which the luxury marques are targeting Chinese individual consumers more heavily now, in part because the Chinese government has been encouraging government officials to buy Chinese domestic makes.
The record of home-grown brands in China has been spotty at best, but government policy makers have been patient and flexible because they recognize the need to get it right in the long run. Many Chinese consumers have continued to mistrust home-based brands, preferring western ones.
One brand that's attempting to bust through all of those difficulties is Qoros, a new automaker that aims to be the first Chinese car brand to be accepted not only in China but also internationally. Its focus is to rethink the traditional notion of product development and marketing based on "speed and open roads" and instead to present vehicles that are "practical, more 'social'" and "suited to urban life," as Advertising Age put it. Qoros is focusing on digital connectivity and unusual amenities such as shoe storage on the passenger side for on-the-go footwear changes and additional space to stow water bottles, the magazine said.
"We thought there was an opportunity to create something different, where the balance is tilted more to comfort, sophistication, digital connectivity—what we call a social car," Stefano Villanti, Qoros' head of sales, marketing and product strategy, told the publication.
Green on Earth Day
Given the nation's growing struggles with pollution, emissions and fuel economy are a primary and growing issue for Chinese regulators and auto brands. Experts say China's biggest pollution problem is coal power plants, not gasoline-consuming automobiles, but the offerings at Shanghai and the dynamics of the market also reflect concern about cutting gas usage.
Stricter rules, for instance, could hurt sales of the largest new SUVs and sedans that auto brands increasingly want to bring to China, but they're coiuntering such concerns by powering many of these models with slightly smaller engines than are used in the US, according to the New York Times. The Chinese government is considering imposing stricter fuel-economy and emissions requirements a la the US and Europe, too.
"The most important discussion around this area is the changing fuel-economy requirements," Jim Farley, Ford's global CMO, told the newspaper.
Japanese non grata
Japan's auto brands still face a tough market in China because of Chinese concerns about the nation's dispute with Japan last year. The dispute over some islands led to the beating of a Chinese man who was pulled from his Toyota in Xian and beaten in front of his family by anti-Japanese demonstrators.
Toyota, Nissan and Honda are showing off new efforts at the Shanghai show: Toyota showed off two low-cost vehicles; Nissan unveiled its first SUV for China; and Honda introduced a new model, Jade, that will hit Chinese showrooms before anywhere else, the Wall Street Journal noted. However, Japanese brands' sales declined sharply in recent months, and their share of China's market for all of last year declined to 15 percent, after it was as high as 20 percent in July. That accelerated a long-term decline in Japanese brands' share in the Chinese auto market.