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CHINA INSIGHTS

QUO VADIS, CHINA? – OUR PERSPECTIVE ON A MARKET  YOU THOUGHT YOU KNEW.

Munich, May 2020 | Topic: China

THE CHINESE MARKET HAS CHANGED SUBSTANTIALLY IN THE LAST COUPLE OF YEARS.

It is not about going there and generate volumes anymore (albeit some notable exceptions). Now, it’s rather a battlefield where numerous players from all areas (new and old alike) fight for customers who are highly demanding, picky, have full transparency and yet show only limited loyalty. On top of that, they have to cope with rising costs – the only way to do so is to pro-actively engage customers in a smart way.

 

From our perspective, there are 5 challenge clusters:

Higher cost of living is coupled with uncertainty about the trade war which limit consumer spending despite increasing income; on municipal level, cities are moving towards increased and more strict environmental rulings through increased license plate limitations, together with push of NEVs by central government and forcing traditional manufacturing and aftersales out of city cores.
OEMs must deal with highly diverse customers across all channels; despite their differences, their common denominator is their high expectations towards OEMs and their products and retail interface.
This all happens while the retail itself is getting highly cost intensive through increasing number of outlets and more luxurious giant 4S dealerships. In the meanwhile, franchises themselves are increasingly harder to control.
Local competitors are catching up quickly and have evolved into a formidable force not only through improved product quality but also through premiumization and budgetization of their products/brands; digitalization is found in all aspects of life. Overall, the stable Chinese growth-market will be subject to some regular short-term disturbances.
More competitors are entering the market. Auto startups, retailers engaging in OEM business, tech giants along with specialized players, verticals as well as intermediaries all challenge OEMs’ status quo.

OEMs MUST FIND THE RIGHT ANSWERS

Western OEMs have invested heavily in the country to participate in its growth. This generated a heavy reliance and thus, they have no choice but to weather the existing challenges which even might magnify over the following years.
We see a series of implications on OEMs which need to be answered in adequate ways.