Unlike the US and many other Western countries, China’s cultural stigma against used things has prevented the majority of car buyers from purchasing used cars in the past. Is the chip shortage “chipping” away at these long-held beliefs? It appears so. Second-hand car transaction data released by the China Automobile Dealers Association shows that in the first half of 2021, a total of 8.4342 million vehicles were traded in the second-hand car market, a year-on-year increase of 52.89%.

Altering the “Must Buy New” mentality among younger generations

As we mentioned above, “new” plays an important role in Chinese traditional concepts. Wearing new clothes for bring in the New Year, buy a new house when getting married, if you pay attention, you will find that “new” often appears in the Chinese language. Clothing rental platforms have struggled to take off, and while gaining some momentum, thrift stores are nowhere near as popular as they are in the US. Therefore, in order for China’s used car market to become more mainstream, the first thing it needs is to defeat the “new is better” tradition.

As Gen Zs consumers gradually enter the market and become the main consumer group, the traditional concept of “buying new and not buying old” is being eroded. In contrast to previous generations, contemporary young people pay more attention to value for money, making them more open to buying second-hand. A great example of this is the second hand marketplace app Xianyu, which has become quite popular among Gen Z consumers.

While young consumers’ attitudes towards used things may already be changing, when it comes to cars, the shortage of new vehicles may be accelerating this shift.

Supply and demand imbalance brings business opportunities for China’s used car market

The market is mainly composed of two parts, supply and demand. Opportunities arise when demand exceeds supply. Affected by the global epidemic, a large-scale chip shortage in the automotive industry has led to a decline in automotive production capacity. On average, a semi-conductor disk needs 3 month to “age” if not longer. On top of a chip shortage, other factors like the supply chain back ups and covid lockdowns in China and the Ukraine war shutting down factories, are further delaying new cars from rolling down the assembly lines.

However, the market demand did not decrease with the decline in the supply of new cars, so consumers have been forced to turn their attention to the used car market.

In addition to the supply and demand gap caused by the decline in production capacity, the reduction in income caused by lockdowns in China and a sluggish job market have also lowered many consumers’ budgets for a new car, but it did not decrease consumers’ expectations.

While there is a stigma against used cars in China, consumers are also worried about appearances. In the “face” driven Chinese culture, a vehicle’s brand is very important. To many people, a used Audi is still better than a brand new Toyota. With this mentality, many Chinese consumers are finding themselves in the used car market.

Policy changes and digitization promoting market development

In addition to the market opportunities brought about by the imbalance between supply and demand, the introduction of favorable policies has also contributed to the development of the used car market.

On the one hand, the cancellation of the relocation restriction policy has made the transaction and circulation of used cars more efficient. In the past, considering the pressure of environmental protection and complicated procedures, local governments usually restricted the inflow of second-hand cars from other provinces, which made it difficult for the second-hand car market to circulate throughout the country. The cancellation of the relocation restriction policy not only increases the circulation rate of used cars, but also further improves the value of used cars.

On the other hand, the reduction of value-added tax on used cars has also reduced the financial pressure of dealers to a certain extent and promoted healthy competition in the industry. Since personal transactions can be exempted from VAT, many used car dealers choose to conduct transactions through “scalpers”, which results in an overall VAT burden well below 2%. The reduction of value-added tax makes the tax burden fairer and healthier development of the market.

What’s more, online apps have also provided a platform for used cars, so that used cars are no longer confined to the small trading market, but can be noticed by more consumers through the Internet.

More information

The post Will the Global Chip Shortage Rejuvenate China’s Used Car Market appeared first on China Marketing Insights.

Data shows that Tesla still has an absolute advantage with 276,000 vehicles sold, nearly twice as many as SAIC-GM-Wuling which came in second with sales of 162,000 vehicles. Wuling was followed closely by Volkswagen, BYD, and BMW. The cumulative sales of new energy vehicles of these five car companies in the first 5 months exceeded 100,000 units. It is worth mentioning that BYD’s latest ranking rose by one place, successfully squeezing out BMW to rank fourth with a gap of over 5,000 vehicles.

The second and fourth place rankings of SAIC-GM-Wuling and BYD, together with the eighth-ranked SAIC Group, mean that Chinese brands now account for 3 of the top 10 new energy vehicle brands in the world. In the top 20 we find more Chinese brands, with Great Wall Motor, NIO and Guangzhou Automobile Group also on the list, ranking 14th, 17th and 18th respectively.

On the best-selling model list, Tesla Model 3 ranked first, with a cumulative sale of 173,000 units in the first five months of this year, followed by SAIC-GM-Wuling Hongguang Mini EV with 153,000 units, and Tesla Model Y ranked third, with a sales volume also exceeding 100,000 vehicles.

In the top 20, in addition to SAIC-GM-Wuling Hongguang Mini EV, BYD Han EV, Great Wall ORA Black Cat, GAC AION S, Changan Benben EV, and Li Auto ONE also entered the list. 

In the Chinese market, new energy vehicle sales are still dominated by Chinese brands

Tesla may be the best-selling new energy vehicle in the world. However, It not the most popular brand in the domestic Chinese market. In the first five months of this year, SAIC-GM-Wuling Hongguang Mini EV ranked first in sales, with a cumulative sale of 152,700 vehicles. Tesla’s Model 3 and Model Y ranked second and third, with sales respectively. 68,300 vehicles, 34,600 vehicles. If you want to know more about the Wuling Hongguang Mini EV click here. 

In the Chinese market, sales of new energy vehicles are still dominated by Chinese brands. In addition to the three models mentioned above, the top 10 brands in sales in the first five months of this year are BYD Han EV, Great Wall ORA Black Cat, GAC AION S, Changan Benben EV, Li Auto ONE, Chery eQ, SAIC Roewe Clever EV.

This means that in the Chinese market, the top 20 best-selling models are all occupied by Chinese brands, except for the two Tesla models that are also made in China and the BMW 530Le plug-in version. 

With Chinese brands having such a tight grip on the local EV market, we predict it will be difficult for western brands to break into these rankings, largely because without manufacturing in China like Tesla does, it will be hard to bring the price down enough to sell the volumes needed to enter the top 10. 

The post Chinese Brands Wuling and BYD Knock BMW Down to No. 5 on the Global New Energy Vehicle Sales Ranking appeared first on China Marketing Insights.

A Means of Expressing One’s Personality

For Generation Z, cars are more than just transportation, they’re also a way to express themselves. This often means that Gen Zs have a very clear understanding of what type of vehicle they’re going or willing to purchase.

According to the report, the first thing they consider when purchasing a vehicle is safety, with 55% of Gen Z buyers saying they are choosing a vehicle based on the vehicle’s safety ratings. Although Gen Z buyers have a lot say in what type of car they want to purchase, oftentimes their parents or grandparents are the ones that are paying the bill. So to them, safety is number one concern for their loved ones and the top thing that needs to be taken into consideration.

But then after that, the second most important thing for Gen Z is design and styling. 49% say they choose a vehicle based on design and styling, which is 19% higher than millennials (Gen Y).

Interestingly, performance and handling is all the way down at #5.

Data also shows that 75% of Gen Z car owners use their car for daily commute, and 73% for family related use and 73% for road trips.

An Important Extension of Their Personal Space

Apart from practical use, many Gen Z buyers are under the influence of social media and the desire to project a certain personal image, so to them a car is so much more than just means of transportation.

In fact, 47% of Gen Z thinks that a car is an important extension of their personal space where they can find their own peace of quiet.  36% of Gen Z thinks that a car allows them to express themselves. Just like fashion, with aftermarket customizations and brand image, owning a cool car can be perceived by others as stylish and trendy.

Intelligence is Key

According to Ipsos’s survey, the top 6 automotive topics are smart transportation, automotive entertainment, automotive customization and DIY, racing, road trip and car models (hobby).

Among them, 40% of Gen Zs are interested in smart transportation. To many Gen Zs, a car isn’t just a driving appliance, it needs to be intelligent. Self-driving, intelligent voice recognition and in-car artificial intelligence are some of the top features that Gen Z buyers are looking for when searching for their next vehicle.

The trend of “China-chic” (GuoChao) is also influencing the automotive industry.

The China-chic trend in the fashion industry has raised awareness of appreciating traditional Chinese culture. However, it did not stop there, it also expanded the concept of “Made in China” among Gen Z consumers to many other types of products.

Generation Z grew up in the “take-off” stage of China’s economy and witnessed the development and rapid growth of domestic brands. Many Gen Zs are increasingly more confident in buying domestic brands over foreign brands. Research shows that Generation Z’s preference for domestic car brands is only second to German car brands that have 100 years of making automobiles under their belt.

47% favor domestic brands over foreign brands, and the top 5 reasons are technology, cost effectiveness, reliability/quality, design and functionality.

Interestingly, when compared to the top 5 reasons of purchasing foreign brands we can see some similarities. This further shows that from the Gen Z buyer’s perspective, the gap between foreign and domestic brands are shrinking.

Gen Z are Drawn to New Energy Vehicles

The internal combustion engine has deeply influenced many generations as the way a vehicle should be powered. Oftentimes the type of engine a car had was one of the deciding factors for purchasing a vehicle.

However, with China tightening down on environmental controls, many Gen Z automotive buyers see new energy vehicles as the alternative. Research shows that 39% of Gen Z buyers are choosing alternative energy vehicles. Among them, 61% said they purchased them for environmental protection reasons.

Many new energy vehicle brands are targeting Gen Z buyers as their primary marketing audience. Brands like Tesla have greatly elevated the reputation of new energy vehicles. With its technology and fast acceleration, many Gen Z buyers sees new energy vehicles as the future of transportation.

SUVs with multi-purpose attributes have become Gen Z’s favorite vehicle type

SUVs have always been popular among the Gen Z demographic. Research shows, 44% of Gen Z automotive buyers prefer SUVs. According to the survey, many Gen Z buyers prefer SUVs because of their high ground clearance, spacious interior, and ease of entry and exit for elderly family members. Owning an SUV enables Gen Z owners to go on road trips where the road conditions may not be ideal.  

If you’re enjoying this series, check back soon for more takeaways from the report!

The post Key Takeaways from the Gen Z Automotive Preferences Insights Report: Part 2 appeared first on China Marketing Insights.

Recently, Ipsos and B-Insights released the Gen Z Automotive Preferences Insights Report (Z时代汽车观洞察报告) which shares some key trends related to this increasingly important buyer group. In this series of articles, we will share takeaways from the report. This first article will give some background on the growing influence of Gen Z buyers.

83.7% of Gen Z consumers have the desire to own a vehicle

China’s economic growth has positively impacted how Chinese people spend their money. The improvement of economic conditions has made cars more accessible and popular among young people.

In comparison to previous generations, the demand for cars is growing among Gen Z, with research showing that 83.7% of Gen Z consumers have the desire to own a vehicle. In 2020, 39% of new cars were purchased by post-90s consumers, only 2% lower than millennials. It is expected that by 2025, 65% of car sales will come from post-90s and post-00s consumers.

In the fast-paced life of young people. Gen Z consumers see driving as an important skill in their social life.

Showing up in a nice car when meeting friends is the image most Gen Zs are after. Owning a car also means freedom, and that freedom allows Gen Zs to navigate their social life with ease and larger footprint.

Employment is a Major Factor Driving Automotive Sales

Research shows that more than 80% of Chinese Gen Zs started driving early in high school and college. They also chose to buy cars earlier than Gen Y.

Research shows that 67% of Gen Z purchase a vehicle when they get their first job. While many Gen Y consumers also purchased their first car around this time, we can see that many Gen Y waited until marriage or having children to purchase a car, while Gen Z tend to have a car long before that.

It is worth noting that employment appears to be a major driver of passenger car sales and something brands may want to take note of when marketing their vehicles.  

The report found that 63% of Gen Z’s first car purchase budget is 150,000 RMB (a little over 23k USD) or greater. It’s important to note though that, much of the time, they are not purchasing the vehicle on their own. Oftentimes, Chinese parents and grandparents will pitch in to help purchase the car as a reward for landing their first job.

Gen Z Also Have Significant Influence Over Their Family’s Vehicles

The study shows that as they grew up, many Gen Z developed strong preferences for car brands,  models, and features and have strong feelings about what cars both they should get, and even their family should get. The report found that 21% of Gen Zs are able to decide what brand and model their families should purchase and another 44% have a strong say in what their family purchases. This deciding power over not only their own cars, but their family’s cars, makes Gen Zs one of the most important demographics when it comes to purchasing power.

If you enjoyed this article, check back soon for more takeaways from the report!

The post Key Takeaways from the Gen Z Automotive Preferences Insights Report: Part 1 appeared first on China Marketing Insights.

As the world is slowly phasing out internal combustion engine (ICE) vehicles, more consumers are transitioning into electric vehicles (EVs). When comparing the ICE vehicles to EVs, EVs seem to exceed on all aspects except one – range.

Range anxiety has prevented many people from owning an electric car, myself included. But what if an electric car that could be fueled in under three minutes and has a range of 750 mi (1,200 km) existed, would you be interested?

Gumpert Aiways Automobile’s RG Nathalie is scheduled to enter production in 2021. The world’s first methanol fuel cells electric car.

The RG Nathalie by Gumpert Aiways Automobile

Gumpert Aiways Automobile presented the RG Nathalie concept at the Beijing Motor Show in 2018. Gumpert Aiways Automobile is a joint venture between Chinese new energy vehicle start-up Aiways Automobiles Company Ltd (爱驰汽车) and former head of Sport and Special Development at Audi Sport Roland Gumpert. Aiways was founded in Shanghai in 2017 by Fu Qiang (Samuel), a former Volvo sales chief of China and Gary Gu.

Roland Gumpert is also the founder of the sports car manufacturer Apollo Automobil and developed the Nurburgring lap record breaking supercar Gumpert Apollo.

Gumpert Aiways is reimaging an electric sports car using direct methanol fuel cell. The RG Nathalie differs from traditional electric cars, it holds methanol in a tank just like a gasoline car would, and then the methanol is converted to carbon dioxide and hydrogen, then the fuel cell will react with the hydrogen to produce electricity. The car’s by product is just water.

The RG Nathalie has a range of 750 miles in eco mode, and 0 to 62 mph around 2.4 seconds. Power goes through all four wheels and has a combined output of 400 kW (540 hp). The best part is you can “gas” up around 3 minutes.

How is the RG Nathalie Different Than a Hydrogen Fuel Cell Vehicle?

How are methanol fuel cells better that the hydrogen fuel cell vehicles you see on the roads today?

Well hydrogen needs special pumps that can take up to 10,000 pounds per square inch of pressure. Shipping, handling, and storage of hydrogen also needs special care.

Methanol, on the other hand, is compatible with our current infrastructure. The majority of our gas stations are compatible with methanol.

This also means that while many electric vehicle companies need to create an infrastructure of charging stations, gas stations could easily start suppling methanol fuel and no new infrastructure would need to be created, making it easier for car owners to find a place to “charge” their vehicles.

Production Will Quickly Shift to China

The company plans to only produce 500 units of the RG Nathalie in Germany. Then, future models will be made in the company’s state-of-the-art factory in Shangrao, China. The manufacturing plant is estimated to be able to produce 300,000 cars per year.

At the time of this article, there are no other manufacturers developing this technology to a production level. If Gumpert Aiways Automobile can prove to the public this new technology works, and works well in the real world, then with the convenience of methanol fuel, there may be less resistance towards transitioning towards electric vehicles.

The post Chinese Startup Aiways Teamed Up with Roland Gumpert to Produce Methanol Fuel Cell Vehicles appeared first on China Marketing Insights.

China is Building its Hypercar in Italy

The S9 is a joint venture between the start-up Silk EV and the Chinese automotive manufacturer FAW (First Automotive Works). Silk is an international automotive design and engineering company and FAW is China’s largest and the oldest automotive manufacturer (and parent company of Hongqi). FAW currently has joint ventures with Audi and Volkswagen Group, Toyota, GM and many more.  The joint venture with Silk plans to build a full range of models called the S series under the Hongqi brand in Italy and China. 

China’s S9 hypercar is expected to be built in the “Motor Valley” of Italy – Reggio Emilia. The joint venture’s new factory is only 27 miles away from Ferrari and an hour by car from Lamborghini. 

Why would they build it here? Well besides the obvious, that Italy is known for making exotic supercars and hypercars, the most important factor was that Italy was the first G7 nation to endorse China’s Belt and Road Initiative. 

The S9 is special and here is why

The S9 isn’t the first super/hypercar to come out of China. The NIO EP9 and the Qiantu K50 have already made little waves in the automotive world. However, the NIO EP9 isn’t street legal and the Qiantu K50 has already gone bankrupt. 

Also both are full electric. The S9 is going to be a plug-in hybrid and is expected to use a newly developed 4-liter V-8 with electric turbocharged gasoline engine capable of 880 hp. It is also expected to have two electric motors to further boost its combined output up to 1,400 hp. 

What makes the S9 special is China is willing to compete in the internal combustion engine segment, which has always been dominated by other countries. Even with all the joint ventures from other western and Japanese brands, making large displacement engines was never China’s strong suit. In comparison to EVs, internal combustion engines are more complex. A 2-liter 4-cylinder engine has on average around 3000 parts in comparison to EVs electric motor with only has a rotor and a stator, so for China to develop this 4-liter V8 engine is showing its engineering capability. 

Where is the market for China – made hypercars?

China has long dominated the cheap and affordable consumer goods market, and countries like Germany, Italy and Japan have long been regarded as the producers of high-end, high-quality products. 

So, will anyone pay $1.8 million for a car from China? The answer is yes. It will probably be sold out before it leaves the factory. There probably will be several groups of buyers and it is highly likely most of them will be Chinese.

Red Rich

The first group could be the “red” rich (descendants of members from the Red Army). These are the people who have become rich by remaining closely associated with the Chinese government. Some may also be the heads of state-owned enterprises. Hongqi has always been regarded as the symbol of the Chinese communist party.  Owning the S9 can be interpreted as being the ultimate supporter of the CCP.

Second Generation Rich

The second group might be the second generation rich, most often their parents are the ones that are paying the bill. Buying a Ferrari or Lambo might project a rich brat image. Buying a Hongqi Hypercar doesn’t change the brat image but at least you’re a patriotic brat.

Investors

The third group will be investors, those who buy ultra-rare Ferraris and other exotic cars. These buyers buy cars purely for investment purposes. If you don’t know too much about the automotive market, typically cars are depreciating items, the moment you drive off the dealer lot you lose 20% of its original value. But that only applies to mass production vehicles, simply because anyone can buy it. 

It’s a different world when you are purchasing a Ferrari or other exotic cars that have extremely low production numbers, typically less than 500 vehicles per model, and brands like Bugatti, which only produce around 70 cars per year. And all of them will be sold long before production. 

Silk-FAW is also planning on only make 70 copies of the S9. With a market as enormous as China, I truly don’t see any reason why the S9 will have “leftovers”. 

And there will also be buyers from other parts of the world to buy the S9 simply based on personal interest and likings. However, it might take some time to build the brand image on the world stage.

The S9 isn’t a car, but an image of a nation

Since its early days, the Hongqi brand has been regarded as a symbol of China’s ruling Communist Party and has always been the brand of choice for Chinese leaders throughout history. For FAW to announce a hypercar under the Hongqi name indicates China’s reputation is on the line, there is no room for failure. 

Read More:

https://www.autonews.com/cars-concepts/us-chinese-challenger-ferrari-picks-italy-debut-18m-hypercar

https://www.motorauthority.com/news/1132544_silk-faw-hires-its-second-ferrari-veteran

https://www.silkfaw.com/

https://en.wikipedia.org/wiki/Hongqi_S9

https://en.wikipedia.org/wiki/Bugatti_Automobiles

The post China’s Auto Industry Takes on its Biggest Challenge Yet – Building the Silk-FAW S9 Hypercar appeared first on China Marketing Insights.

However, the rules for getting into the EP Club seem a bit like multi-level marketing, causing some people to poke fun at the brand. Let’s take a look. 

You need to help NIO sell 25 vehicles to join NIO EP Club

Recently, a salesperson at one of NIO’s stores shared that when a customer has purchases, repurchases, or recommends others to buy a NIO, that customer will get NIO points. When the points have reached a certain level, NIO will recommend the customer to enter the high-end EP Club. 

Doesn’t sound too complicated. However, the caveat is, just how many NIO vehicles does a customer needs to purchase or refer others to buy?

On July 22, a NIO spokesperson told media outlet Red Star Capital Bureau that, according to the data from February this year, current members of the EP Club on average have purchased/helped sell 25 NIO vehicles. The spokesperson went on to say that, “Some owners have sold and purchased more than 160 cars.”

Based on the average starting price of NIO at 400,000 yuan (62k USD), if the average car owner bought/sold 25 cars, then the average EP Club car owner has driven 10 million yuan (1.6 million USD) in sales for the company. In other words, if you want to enter the EP Club you have pay more than 10 million yuan to buy NIO vehicles or created more than 10 million yuan in revenue for NIO.

What are the benefits of joining this “high-end community”?

According to NIO’s official introduction of the club, members of the EP Club can enjoy EP9 (the company’s crown jewel race car) driving experience, get formula-E racing tickets, join overseas ‘study’ tours, and business resource sharing. However, many members believe that EP Club is more like a “tour group” of the wealthy and powerful.

In November last year, many social media influencers shared EP Club’s trip to Lijiang, in Yunnan Province. According to one blogger, in addition to club members, NIO also invited some media outlets to join the event.

After arriving in Lijiang, the members dressed in formal clothes to attend the dinner on the first day, watched some members perform and CEO Li Bin also attended the dinner.

The activity on the second day was to climb the Yulong Snow Mountain in the morning and in the afternoon, members did some activities in the ancient city of Lijiang. In the evening, they held a martial arts-themed cosplay (role playing). Li Bin also dressed up and took a group photo with the members.

According to the Blogger, members only need to buy their own plane tickets, while the hotel and event expenses are all covered by NIO.

A member of the club also published a video revealing more details about the EP Club’s trip to Lijiang, including staying in a five-star hotel with gorgeous view, an EP9 track day driving experience and an interview with the CEO Li Bin. In the video Li Bin said: “the EP Club is a gathering of NIO’s most die-hard users.” Notably, he said the word users, not fans.

Is the NIO EP Club worth it? 

NIO CEO Li Bin once bluntly said that buying NIO vehicles is not just buying a car, but “a ticket to a new lifestyle.” 

From very early on, Li Bin learned from the success of Starbucks that no matter how advanced the Internet is and how developed e-commerce is, people’s inner demand for social interaction will not decrease, and they are willing to pay for services beyond the functionality of the product.

Another aspect of this is the people in this group are either wealthy or well-connected. So, for some, this group isn’t just a “tour group” – it is more like a Country Club. The only difference is Country Club is a lot cheaper.

The resources from social connections formed at the EP Club may allow some to gain more wealth and connections, so the 10 million yuan may be well worth it. 

But some netizens have reacted unfavorably to information about the club, saying that NIO is not an EV manufacturer but a multi-level marketing (MLM) company. Others have said it seems like a high-end social networking company where the membership fee is cars. 

But this isn’t the first time NIO has been called an MLM company, the brand has been dealing with this nickname for several years now due to its ongoing referral incentives and the natural passion its owners have for their vehicles. NIO’s response? “These types of rumors exist, mainly because people don’t have a deep enough understanding of our brand.” 

The post Will NIO’s Newest Marketing Tactic, the NIO EP Club, Help or Hurt its Brand Image? appeared first on China Marketing Insights.

Unlike other foreign automakers, Tesla got the warmest welcome from the Chinese government. The government even allowed Tesla to remain “single”, no joint ventures and no profit sharing. What makes Tesla so special and not the others? What is the real benefit of Tesla having such a heavy presence in China? 

Tesla is “The Neighbor’s Kid”

Chinese students often hear their parents tell them about “the neighbor’s kid”, the poster child who gets better grades and is more successful. They are always compared to the neighbor’s kid, the eternal competitor. 

While Tesla did live up to its motto of accelerating the world’s transition towards sustainable energy, Tesla also made electric cars cool. Tesla is the neighbor’s kid, the poster child of the EV industry. The Chinese government has made it loud and clear that it wants to dominate the global EV industry, so keeping the poster child living in the backyard is probably more than ideal for a couple reasons. 

1) Tesla Made EVs Desirable

Tesla’s presence changed people’s perception of electric cars. A similar comparison would be Michael Jordan’s effect on basketball in China. Jordan inspired generations of Chinese people to love basketball, and until today basketball, is still the most popular sport in China. Tesla had the same impact on the electric vehicle industry.  Prior to Tesla, electric vehicles weren’t popular in China. Tesla changing people’s perception of EVs has helped the Chinese government with its initiative of phasing out gasoline powered cars by 2035. It also created a market for high-end EVs for local brands to tap into. 

2) Tesla Brought Attention to Local EV Brands in China

Let’s use the example of Huawei. Huawei CEO Ren Zhengfei once said he thanks Trump for naming Huawei as a competitor in the global 5G race and creating all this controversy. Why? Because now everyone knows Huawei and knows that Huawei’s technology is advanced enough to be considered a competitive threat. No amount of money can buy this kind advertisement and brand awareness. 

Similarly, very few people in the west had heard of local Chinese EV brands NIO, Li Auto and XPeng. But now they are known as Tesla’s competitors in China and often compared with Tesla in the media. The more spotlight Tesla gets, the more attention they get too. 

3) Technology

The biggest advantage will be technology. Tesla has been and will bring a considerable amount of technology into the Chinese automotive industry. China is betting big on autonomous driving, and Tesla is at the forefront of achieving this goal. Tesla’s presence forces domestic brands to continuously improve their technology and products to be able to compete.  

Right now, Tesla and Xpeng are both trying to achieve full autonomous driving; however, they are going very directions. Xpeng is going the more traditional route by using sensors and lidar, and Tesla is trying to achieve this goal by only use cameras and software. There are pros and cons to both methods, sensors and lidars give vehicles more accurate measurement of distance, thus in the crowded Chinese streets it might have an advantage. Yet Tesla’s camera system will provide major savings in production cost since lidars and sensors are not cheap. We have yet to see who will be the winner, but a little healthy competition is always good.  

Tesla’s Strong Presence in China Benefits Local Governments and Peripheral Industries

Aside from boosting loval EV brands, Tesla’s presence in China also boosts other industries. 

Tesla’s Shanghai Gigafactory was entirely financed by Chinese state-owned banks, and Tesla paid a 50-year lease on the land to the government. Tesla also agreed to pay 2.23 billion RMB around $320 million dollars in tax to the Chinese government annually starting at the end of 2023. 

The benefits are not only for the Chinese government, they also extend to the local industries. Tesla made a deal with Chinese battery manufacturer CATL to supply batteries for all Chinese-made Tesla vehicles, some will also be exported to Europe, Australia, and New Zealand. The Gigafactory also adds jobs and requires the purchase of locally made materials and equipment. By 2030 Tesla wants to source 100% of its raw materials and equipment locally.  This allows Tesla to further cut production costs and make the Model 3 and Model Y extremely affordable. Opening a factory in China has already dramatically lowered the cost of purchasing a Tesla in China, resulting in a huge bump in sales. In fact, Tesla saw its second highest month of sales in June, after another price drop. 

Despite All This, Tesla Will Always Be an Outsider in China 

Like any relationship, Tesla and China have their up and downs. For example, the recent Shanghai Auto Show incident where a protester standing on a show car claimed that her Tesla’s brake failure caused an accident nearly killing four family members caused some negativity around the brand. Signs of “No Tesla Allowed” started to appear at some shopping centers and parking lots, Tesla felt the drop in sales almost immediately in April. But we can see that incident quickly passed and sales rebounded in May and June. 

The Chinese government also banned Tesla vehicles from entering government properties and military bases, in fear of Tesla’s cameras capturing national security related imagery. And there were several recalls regarding its software. 

Despite having Tesla as the motivator in the Chinese EV market, Tesla will always be on pins and needles. China’s EV race is like the Game of Thrones and there are numerous brands out to kick Tesla off the throne. 

And quite frankly, Tesla’s continued success in China is purely based on Chinese government’s mood. One can only hope the tensions between China and the United States will gradually deescalate, so we see more collaboration and less competition.

The post How China Leveraged Tesla to Drive the Growth of Local EV Brands appeared first on China Marketing Insights.

The Issues with Three Wheel Delivery Scooters

For decades, the electric three wheeled delivery scooters have been the most efficient delivery vehicles available. They can navigate the narrowest streets imaginable and most importantly they are extremely cost efficient. There is virtually no maintenance required and they run on electricity. However, there are also downsides of using these trikes as delivery vehicles.

First, there are safety issues.  On the streets of China you can often see accidents involving these types of delivery vehicles. They have poor visibility towards the back and little to no technology features to help drivers navigate traffic and pedestrians. 

Secondly, there is virtually no protection from the elements, making it very uncomfortable to drive most of the time. It may be convenient, but it does little to make a happy workforce. 

Difficult to Find Other Options

With these safety issues, the Chinese government has also been pushing hard to gradually phase out these delivery vehicles. Some major logistic companies such as those owned by JD.com and Alibaba have been adding small gasoline powered delivery vans into their fleet. However, due to increased cost and maintenance, these remain a small portion of the delivery fleet. Another issue with vans is that they require a driver’s license to operate, while trikes don’t, so with trikes companies can hire anyone that is willing to work. 

As for electric vans, many of the current options are too expensive. Another problem is the range issue. With an extremely time sensitive industry such as logistics, any down time needed for charging will cut into the already paper-thin profit.

How the Chengshi 01 Aims to be the Solution

Alibaba-backed Chinese technology start-up, Matrix Data (矩阵科技) has revealed a fully electric delivery van specifically designed to solve these issues. What’s more, according to the company, delivery personnel were involved throughout the entire design process, adding and subtracting features that are most important to the workers. 

Priced at six thousand US dollars, the Chengshi 01 is more affordable for logistics companies. While still small and nimble, the overall styling of the Chengshi 01 is a huge upgrade compared to the three wheeled scooters. I would have no complaints seeing this stylish delivery van all over China. More importantly, drivers are protected from all sides. 

Matrix Data claims the Chengshi 01 has a range of 150 miles around 240 km. But if that is not enough, Chengshi 01 solves the range issue by adding a unique power bank solution, allowing users to add battery packs as needed. From the official website image, it seems that users can easily swap out battery modules with no special tools needed, simply unlock the handle and remove. The extra battery storage area can also be used as an extra cargo compartment to maximize payload capacity.

Chengshi 01 also features software specifically designed for delivery workers, allowing easy access to information such as location, vehicle health and more.

I predict that soon we should see this adorable delivery van roaming the streets of China. According to the Matrix spokesperson, China’s state-owned postal service provider China Post has agreed to purchase ten thousand Cheng 01 vans and will deploy them immediately. If this comes to fruition, it is highly likely that we will quickly see other companies soon follow. 

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Why Have Mini EVs Taken Off in China? 

There are many reasons why the mini EV has become popular in China. The first one is that cute cars have always been more accepted in Asia. 

Secondly, the pandemic has made public transportation unattractive. The fear of inevitable close proximity has forced more people to choose the sealed and isolated automobiles to get around. When you take a look at the core consumer of these tiny cars, they are young millennials and Gen Z consumers who live in a city and have typically relied on public transportation to get around. According to the Financial Times, 65% of young Chinese people are considering purchasing a car and leaning towards small compact vehicles. 

Besides trying to avoid public transportation, living in a city in China means traffic and parking are major headaches. So more and more young people, especially younger female buyers, are choosing compact vehicles over the full-size SUV’s and sedans because they are easier to drive and park.  

These mini EVs are also typically very affordable, which is appealing to young, single people. 

But Would People Look Down on You For Driving a Cheap Car?

In a very “face” driving society such as China, you may think that people would look down on people who drive these mini EVs, assuming they can’t afford a bigger and better car. But that is not the case. Why is that? 

Well, to avoid this occurring, automotive manufacturers are making compact vehicles that are full of personalities, so it does not give people the perception of a cheap car, instead, people are buying the car to show off their individuality, to be part of an in-group, a trend. 

This is similar to Mini Cooper, Fiat 500 and Smart. Although they are not expensive cars, but because of the design and color scheme, people typically see those cars as trendy and cool vehicles to have. Same with these cute Chinese mini EVs. 

Consumers are Buying Mini EVs Online

Another interesting trend is that majority of the cute car buyers are buying cars online. According to a Forbes article, young consumers between the age of 18 to 24 are purchasing vehicles online, accounting for 23% of the total vehicle sales in China. 

Young consumers are very comfortable purchasing things online and many of them don’t like the experience of haggling over a car price at a dealership. What’s more, electric vehicles are simpler than the internal combustion engine vehicles, there are no engine displacement and transmission types to choose from. This reduces the need to test drive or even see the vehicle in person before purchase. 

Three Popular Mini EVs in China

Ora Good Cat R3

The ORA brand was established under its parent company Great Wall Motors in 2018. The brand was created to appeal to younger consumers. The most popular model is the ORA Good Cat R3. With its retro styling, it is reminiscent of the classic Porsche 911. The R3 seats 5 and is able to cover 311 miles (501 km) on a single charge with its 143 hp motor. It was revealed in July 2020 and had over 5,000 orders within the same month. 

Wuling Hongguang Mini EV

The Wuling Hongguang Mini EV is already well known in the china market. It rose to fame around July 2020. It is manufactured by the joint venture of SAIC, GM and Wuling. This all-electric city car became an instant hit among all generations, especially young female consumers. Hongguang Mini EV sold more than 200,000 vehicles within the first 200 days, setting a global sales record for new energy vehicles. With its instant success, the company decided to add more color choices to the model, also adding a convertible version to further entice young trendy consumers. 

Baojun E300

Another interesting brand that is also under the SAIC-GM-Wuling joint venture is the Baojun brand. The vehicle debuted in January 2020 and quickly became a popular choice amount young trendy buyers with its futuristic and robotic look. The Baojun E300 can conquer 190 miles (305 km) on a single charge and has 150 Nm of maximum torque. It has a top speed of 100 kilometers per hour and supports DC fast charging. 

The Future of the Mini EV is Bright in China

Recently the Chinese government has been expressing increasing support for larger EVs as it would prefer to have China become known for its electric SUVs rather than its cute cars. But that is unlikely to stop the growth of this industry. 

In my opinion, China’s small car industry will continue to take off rapidly, like BMW’s Mini and Mercedes’s Smart. In China, there is already a cult following of these small cars developing as well as a large aftermarket industry allowing owners to further customize them and fully express their personalities. 

The post A Large Market for Small Cars: Mini EVs Have Taken Off in China appeared first on China Marketing Insights.