Factors Influencing buying Decisions

As the 60th National Day is approaching, both car selling and buying in domestic market are escalating and a great number of consumer’s enthusiasm for the cars are improving month by month. What factors caused such a phenomenon? With respect to this question, governmental agencies, industrial associations, auto manufactures, auto dealers and many media have different opinions of their own. My personal point of view is that policy factor plays a decisive role, economic recovery lays most important foundation and transition of consumer’s concepts is great impetus. Focusing on the factors that influence the consumers’ decision to buy cars will surely promote our future car sales.

　　I. Analysis on some decisive factors influencing consumers’ car buying decisions

　　1. In 2009, Chinese government has introduced a series of polices playing a major role in promoting car consumption, of which the policy reducing or terminating tax on purchasing vehicles of 1.6 liter/low emission has unprecedented impact in particular. Other than that, there were other policies like “car selling to countryside”, “car old-for-new” and “car loan”, etc.

　　2. The minds of consumers in general of being conformity and pursuing better cars to match others’ have reached another peak. Identity, status and pride still are the decisive factors that influence the car-buying. Chinese are different from United States people buying a car for fashion reason.

　　The United States has a large population of 270 million, its national land area being about the same size of China. Surprisingly, United States’ road mileage total up to 6.3 million kilometers, even interstate highways only running 74 thousand kilometers. In comparison, China has a population of 1.3 billion and 300 million households while owns only one fifth of road mileage and one fourth of highways of United Sates.

　　3. One of the driving forces for the car consumption is to improve the life quality. According to a poll on consumers who has intention to buy cars, 53% aims at improving life and only 11% would like use car as a walking substitute.

　　4. With the acceleration of urbanization, China’s urbanized population has reached 607 million and rate of urbanization 45% which promote greatly the car consumption, according to a latest release by a government agency.

　　5. Due to the constant expansion of city scale and the rapid development of satellite towns, the price for the real estate continuously goes up. Consumers in general have to choose to live in the houses locating in the suburban areas, which further stimulates the demand for buying cars.

　　6. As the living standard of people going up and the car holdings rapidly increasing in particular, the vehicle culture becomes more rich and colorful and consumers more mature. Therefore, the preference for the cars is in a process of upgrading and being fashion. The evidence supporting the idea is that more and more special purpose vehicles, all terrain vehicles, SUVs, MPVs and caravans are bought buy households.

　　7. Auto manufactures and industries are releasing continuously new brands and models as a stimulant to further consumption. According to an incomplete statistics, there are 86 large-scale auto fairs in 2009 only. Those auto fairs are very popular and promote the vehicle consumption to some extent.

　　8. A strong pubic opinion of auto market also a major contributor. Despite of the impact of global financial crisis, the economy of China maintains a sustained and stable development and the markets of house, stock and auto are still developing. The positive macroeconomic climate has greatly increased the consumers’ confidence on the market and encouraged their enthusiasm to buy cars.

　　9. The idea, preference and climate of consumption of consumers in general are having historical change and transition.

　　II. Analysis on the features of current car consumption

　　1. Low-emission, economy-class and compact cars top the sales of all cars. The percentage of private cars consumption has reached an unprecedented level and percentage of middle- or high-level consumption would likely to expand.

　　2. The difference of peak periods and off-seasons is vanishing with the slack seasons quite busy. The sales of cars increase month by month and there is no sign of turning weak.

　　3. Car consumption will be influenced more directly by macroeconomic situation which includes, for example, stock market, house market, etc. More critically, current time represents a sensitive period of policies towards to auto market. It means that even rumors, information, and changes of policies will have major, or decisive, impact on the auto market.

　　4. When the gasoline becomes more expensive, the sales of both low-emission car and middle and high-end cars are rapidly increasing. Raising the consumption tax and oil price had an adverse effect on the consumption of high-emission and luxury cars, the sales of which going crazy and its growth of market share exceeding the low and middle-end cars.

　　5. The escalating oil price does not surpass consumers’ enthusiasm for off-road vehicles and SUVs. The social basis for this phenomenon is being young, fashionable, individual and superior. According to a research report by China Association of Branding Strategy, China now has a population of 10-13 million whose annual income is around 240, 000 RMB with a saving amount of 0.5-1 million. The demand brisk advances the sales of middle and high-end cars.

　　6. More and more roads, longer highways, more tightened parking lots and more trafficked transportation make consumers’ enthusiasm more zealous.

　　7. Used-cars market becomes more active with traded volume and value of used-cars rapidly growing. Both the used-car and new car markets mutually depend, complement and share common development. In some big cities, the percentage of sales of new cars and used-cars are becoming 1 versus 1.

　　8. Under the cloak of “manufactures’ market guiding price”, the sales of cars with added charges become a nationwide, long and common phenomenon. Price-off promotions are also an important approach for the sellers. However, the volume of cars increases continuously which covers the price-off promotions.

　　9. Online enquiries, doing business on the transaction market and maintenance in 4S stores demonstrate the common practice of choosing, purchasing and using cars. With the change of market competitive environment, both manufactures and dealers reach consensus that the approach of marketing must change accordingly.

　　10. Internet has a growingly important impact on the car consumption. The online vehicle fairs are rapidly developing and all manufactures and dealers attach great importance to the internet propaganda with different resources though.

　　11. Comparing to consumer’s idea of car purchases in developed countries, Chinese consumers pay more attention to cars’ appearance, price, brand, equipment and advertisement propaganda rather than cars’ quality, security, technology.

　　12. With respect to the cars’ color, consumers’ first choices are traditional black, silver and white. However, the idea of “cars representing personality” makes consumers attaching more importance to the sense of being fashionable. As a result, bright colors like red and blue become the choices of many young consumers.

　　13. As China’s consumption market becomes more mature, the speed of high-end MPVs entering into common families has accelerated. Comparing to cars and SUVs, high-end MPV does not only own features of luxury inner decorations, well-appointed equipments and high security but also have a wider space which is more convenient for a whole family. For the high-end MPV, the household market is undoubtedly a new and potentially booming market.

　　14. The number of female car purchaser increases at a annual rate of 30% and they represent the new and main strength in the auto market. Furthermore, the enthusiasm of female purchasers is usually higher than that of males. The appearance and shape of cars are the first choices of most of female consumers. Even so, the woman’s cars in the current auto markets are very few which is regrettable.

　　15. Many consumers favor automatic transmission cars because of the badly trafficked transportation. Generally speaking, manual transmission cars are more fuel saving and cheaper than automatic transmission ones. Based that fact, manual transmission cars are the dominant car models in the current market. According to a recent auto consumption poll, however, the percentage of choosing automatic transmission cars in big cities like Beijing, Shanghai and Guangzhou is obviously higher than in other middle or small-sized cities. The analysis shows the major reason for that is because the big cities have a worse problem of trafficked transportation. In these cities, the average driving speed of cars is relatively slow. Under such condition driving automatic transmission cars is much more convenient and comfortable.

　　16. Although government is improving the policies of auto loan for consumption, the current consumption with auto loan is still not very active. There are two major reasons for this. First, price of new cars is unstable. The off-price promotion of cars is the mainstream trend in the market even with some few phenomenon of sale with added charges. Therefore, the unstable price of new cars makes consumers uneasy. Secondly, the idea of consumers in general to buy cars with auto loan has not made any breakthroughs.

　　III. Analysis on the concerns of consumers

　　1. Consumers in general now pay much attention to the trend and timing of governmental policies which have already been implemented and aim at promoting car consumption.

　　2. More than 70% of consumers expect government to further introduce new policies to promote car consumption.

　　3. Consumers in general are much concerned about government’s plan to promote car sales and consumption in 2010.

　　4. On National Day, New Year’s Day and Spring Festival Holidays, what will the market decisions and favorable promotions by auto manufactures and dealers?

　　5. What the overall trend for the vehicle price?

　　6. Domestic macroeconomic prospects, changes and objectives.

　　As the auto market is developing rapidly, the price and marketing of vehicles have to change accordingly. We must attach great importance to the demand of consumers in general, analyze them attentively and put forward accordingly responsive policies and measures. By doing so, we can be well-prepared for the auto market in the rest of this year and year 2010 to realize the object of a rapid and sustainable development of auto market. (Translated by Shanglai•Crab)

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