Market Outlook China Large Screen Instead of More Horsepower
For a long time, China was regarded as the savior of the automobile industry. However, the upward trend has slowed down and traditional manufacturers are facing new challenges.
For almost four decades, the Chinese economy knew only one direction: upwards. But there is trouble in paradise: the upswing is not yet reversing, but it is clearly getting weaker. Economic growth in the coming years is expected to be only around 6 %, with China recording double-digit growth to date. There are many reasons for this. For instance, many neighboring countries such as Bangladesh are becoming more competitive. At the same time production costs in China, which have so far been very low, are rising. In addition, many provinces in China are heavily indebted, so the time of expensive economic development programs is over.
The automotive industry is also becoming aware of this, having sold fewer vehicles in 2018 than in the previous year for the first time since the nineties: Ford recorded the largest decline of 38 %, the French PSA Group suffered similarly heavy losses and even market leader Volkswagen reported a minus of 2 %. However, it is not only the somewhat gloomy mood in the economy that is causing trouble for the established car manufacturers, it is also the new Chinese manufacturers who are raining on the parade of the grand old companies from Europe. It is true that BAIC, Chang'an or Haval, domestic manufacturers in China are also currently having to accept declines. But GAC, Geely or Roewe generated a plus of up to 24 %.
Chinese Car Buyers Are Changing
The main problem is: Cars from the West have long since ceased to be a sure-fire success. Chinese manufacturers have clearly caught up in terms of quality in recent years and have long since overtaken established carmakers in the areas of electric mobility and infotainment. Many Chinese customers feel that every inch more touchscreen width is worth considerably more than a little bit more horsepower. On the Chinese e-car market, the Germans in particular hardly matter at all. However, this segment is booming because the Chinese government is pursuing a strict electrification policy: In the urban areas, e-cars are now almost the only vehicles to receive new permissions. Huge numbers of loading stations are being built and customers receive wall boxes for free.
The spread of electromobility is planned thoroughly. The same applies to the expansion of the 5G network, which is expected to boost autonomous driving. Another example shows that the Chinese are masters in stringent planning: Since the start of construction of the German capital's BER airport, 27 airports have been built and put into operation in China.
But let’s return to the subject of cars: Another problem for the established manufacturers is that many customers are buying a car for the first time. Brand loyalty is therefore alien to them. However: Premium manufacturers such as BMW, Mercedes-Benz or Porsche continue to benefit from the companies' history, and their image is still attracting wealthy Chinese to the showrooms. If these brands manage to retain new customers in the long term, they will still have a rosy future ahead of them. Most new premium customers in China are in the age of 20 and 30 years old and will purchase numerous other vehicles in their lives.
Manufacturers Focus Their Developments More Strongly on Chinese Customers
But the Global Players should not rely solely on the splendor of their name. Jaguar Land Rover, which has sold 21 % fewer vehicles in the past, has felt this in particular. Without an attractive range of models, the premium brand is of little use, but the Brits have little to offer apart from the aging Range Rover. And whether the new Evoque, which has just been launched in Europe, can stop the downward trend is doubtful: The small lifestyle car comes at a time when SUV demand in China - unlike in the rest of the world - is declining. It looks very much like its predecessor.
But it is extremely important for Chinese customers to show that they are driving a new car: The new BMW 7 Series opens its “grille mouth” wide open for a good reason. While the latest BMW design is receiving a lot of incomprehension from us, the design is being well received in the Far East. But it has long been a fact that we have to bow to the Chinese taste: The Mercedes S-Class, for example, is also tailored to the Chinese market; the engineers in Stuttgart would certainly not have developed an ambient light with 256 different colors for Europe. Even the short dip of the Chinese market will not change that: With more than 28 million vehicles sold per year, it sets the tone.
This article was first published by Automobil Industrie.
Original by Svenja Gelowicz / Translation by Alexander Stark
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