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Chasing dreams? Luxury car sales depend on it
July 22, 2013, Monday
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AS a child, who never said, "When I grow up I want to drive a Ferrari or a Lamborghini?" And who never stood in front of a fancy car dealership window, dreaming about a premium car parked in the family garage?
It's not just kids who fantasize. That was clear when I moved to Shanghai, where the dream of owning a luxury car takes on manifold proportions.
China's luxury car market has become much more crowded in the last five years. In 2008, premium car buyers had 10 models under five brands to choose from the showrooms. Five years later, the number has risen to 90 under 25 brands, accounting for 9 percent of the total car market. Luxury models are scattered across various car segments, from small to full-size sedans and SUVs, where the market share of premium brands peaked close to 17 percent in the first six months of 2013.
In this amazing expansion, the portfolio of traditional German brands has been stretched widely. The traditional Saloon S class of Mercedes-Benz has an alphabet of model-mates - A, B, C, CLS, G, GL, GLK, M, R, S, SL, SLK and SLS. BMW is extending its current range to retain its customer base by addressing their ever-changing needs; for instance a MPV is in the pipeline for a family of three. Audi, Land Rover, Infiniti and other manufacturers have been following the same line of extension across segments to ensure they provide attractive propositions to every type of new car buyers. The aim is to cover the entire market, not just niches.
Despite a relative economic downturn and despite car plate restrictions in big cities, the success of premium and luxury cars remains undeniable. The growth of historic players like Audi, BMW, and Mercedes-Benz has been maintained even as new players enter the market. All of this represents a fantastic opportunity for car fans looking for a premium driving experience to shop around, compare prices and choose a model that will exhilarate their senses.
For carmakers, the challenge is to attract new customers and instill customer brand loyalty. That requires careful attention.
Naturally, to be purchased, models need to be known, but they also need to be recognized by others as a mark of differentiation. A dealer network is obviously critical to capture selling opportunities. Automakers also need to align the standard of their products, in the sense of design, quality, equipment and service, to the level of expectation of demanding Chinese customers. Let's take a closer look at some of these factors.
Car design. Due to frequent business use of cars, a buyer may need to provide clients, the boss or even workmates a pleasurable journey. Chinese premium car buyers want more leg space and more comfort features in the back seats. Manufacturers who deliver models with extended wheelbases and proven safety features have the advantage.
Car manufacturing. Chinese premium car buyers always push for locally produced cars with European standards of quality and craftsmanship. If they are paying a premium price for a car, they expect superb quality in return.
Client service. Public criticism of after-sale service for top performance cars posted on the Internet reminds us that the quality of service delivered to end-customers has to be as outstanding as the car's performance. There is no room for compromise.
Innovation and novelties. Luxury cars are subject to fashion trends. They are discussed, compared, adored or criticized off-line as well as online. Innovation, new model introductions and launch events are necessary to "stay in the spotlight."
Finally, superseding these rather logistical elements, premium brands have to touch the hearts of their customers. Like jewelry, luxury cars must convey values, promise and the image of wealth and status.
Looking at the China market, one can identify three lifestyle trends that luxury automakers need to consider.
The connoisseurs. These are people interested in technical details, engineering and design elements that have a bearing on the performance, control or safety of driving. They believe that advanced technology enhances the driving experience.
The easy-going self-focused. These are people who look for more comfort and more personalization in a car. Their perfect model is one that handles easily and provides a high level of comfort - a form of cocooning. They will be less constrained by the opinions of others, preferring to rely on their own emotions. We do see in China the increased popularity of the personalization of cars through options, accessories and customer service.
The fashionsistas. These are people who like to be at the forefront of trends to display their individualism and self-confidence. They enjoy being the focus of attention. They are more influenced by Western values and the small but fashionable cars.
It's not just kids who fantasize. That was clear when I moved to Shanghai, where the dream of owning a luxury car takes on manifold proportions.
China's luxury car market has become much more crowded in the last five years. In 2008, premium car buyers had 10 models under five brands to choose from the showrooms. Five years later, the number has risen to 90 under 25 brands, accounting for 9 percent of the total car market. Luxury models are scattered across various car segments, from small to full-size sedans and SUVs, where the market share of premium brands peaked close to 17 percent in the first six months of 2013.
In this amazing expansion, the portfolio of traditional German brands has been stretched widely. The traditional Saloon S class of Mercedes-Benz has an alphabet of model-mates - A, B, C, CLS, G, GL, GLK, M, R, S, SL, SLK and SLS. BMW is extending its current range to retain its customer base by addressing their ever-changing needs; for instance a MPV is in the pipeline for a family of three. Audi, Land Rover, Infiniti and other manufacturers have been following the same line of extension across segments to ensure they provide attractive propositions to every type of new car buyers. The aim is to cover the entire market, not just niches.
Despite a relative economic downturn and despite car plate restrictions in big cities, the success of premium and luxury cars remains undeniable. The growth of historic players like Audi, BMW, and Mercedes-Benz has been maintained even as new players enter the market. All of this represents a fantastic opportunity for car fans looking for a premium driving experience to shop around, compare prices and choose a model that will exhilarate their senses.
For carmakers, the challenge is to attract new customers and instill customer brand loyalty. That requires careful attention.
Naturally, to be purchased, models need to be known, but they also need to be recognized by others as a mark of differentiation. A dealer network is obviously critical to capture selling opportunities. Automakers also need to align the standard of their products, in the sense of design, quality, equipment and service, to the level of expectation of demanding Chinese customers. Let's take a closer look at some of these factors.
Car design. Due to frequent business use of cars, a buyer may need to provide clients, the boss or even workmates a pleasurable journey. Chinese premium car buyers want more leg space and more comfort features in the back seats. Manufacturers who deliver models with extended wheelbases and proven safety features have the advantage.
Car manufacturing. Chinese premium car buyers always push for locally produced cars with European standards of quality and craftsmanship. If they are paying a premium price for a car, they expect superb quality in return.
Client service. Public criticism of after-sale service for top performance cars posted on the Internet reminds us that the quality of service delivered to end-customers has to be as outstanding as the car's performance. There is no room for compromise.
Innovation and novelties. Luxury cars are subject to fashion trends. They are discussed, compared, adored or criticized off-line as well as online. Innovation, new model introductions and launch events are necessary to "stay in the spotlight."
Finally, superseding these rather logistical elements, premium brands have to touch the hearts of their customers. Like jewelry, luxury cars must convey values, promise and the image of wealth and status.
Looking at the China market, one can identify three lifestyle trends that luxury automakers need to consider.
The connoisseurs. These are people interested in technical details, engineering and design elements that have a bearing on the performance, control or safety of driving. They believe that advanced technology enhances the driving experience.
The easy-going self-focused. These are people who look for more comfort and more personalization in a car. Their perfect model is one that handles easily and provides a high level of comfort - a form of cocooning. They will be less constrained by the opinions of others, preferring to rely on their own emotions. We do see in China the increased popularity of the personalization of cars through options, accessories and customer service.
The fashionsistas. These are people who like to be at the forefront of trends to display their individualism and self-confidence. They enjoy being the focus of attention. They are more influenced by Western values and the small but fashionable cars.
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