I'm back from China and the mania of the Beijing Auto Show. It was a great 4 days spent in the world's largest car market and despite jet lag (including the effects of a 5.5 hour delay + 13 hour flight) I maximized every waking minute of my trip.
One of the clear highlights was a visit to a Buick dealership in the Chaoyang district of Beijing. I was dying to learn more about Buick because my views of the brand are obviously based on my knowledge of the US market and Buick in China is a completely different animal. It's not easy to drop all pre-conceived notions of the brand, but it was necessary. The field trip was filled with tons of information and insight, but here are the numbers that stood out in my mind:
If you think we have a lot of car choices in the US, you would be overwhelmed with the number of brands and vehicles in China. The market is growing and the cars-to-people ratio is low, so there is a lot of opportunity if you can break through the clutter. Buick has the fortune of being one of the oldest foreign brands in China, so the name is established. Many dealers (and people, too) can't help but feel a connection with the brand as it's been around before every manufacturer and its brother tried to get a foot in the country. It wasn't that long ago when a large portion of sales in China were comprised of mid- and large-sized sedans with most of the demand coming from government officials. That has changed today as the average consumer drives the market, and considering the population is 1.3B strong, it has led to explosive auto sales growth. Today, Buick has 3.7M owners in China, and considering how relatively new China's auto market is, I'd consider that a pretty high number. To contrast, there are nearly 6 million Buicks in operation in the United States, where it ranks #10 among nameplates for the most vehicles on the road. Sure, 6M is a lot higher than China's 3.7M, but Buick can trace its US roots back to 1899, so China is several years behind.
It's unfathomable for most American consumers that a Buick can be the #1 selling passenger car in the world's largest car market... but it is. The honor of the top selling passenger car goes to a vehicle called the Buick Excelle and I can vouch that you see plenty of them on the streets of Beijing. It's in the compact car segment, which has grown tremendously in China and has made up nearly half of car sales last year. Shanghai GM, which sells the Buick brand in China, has another compact amongst the top sellers - Chevy Cruze, a name Americans might know a little better. I find it interesting that smaller (A/B segment) cars which are popular in Europe and other parts of Asia are not as popular in China. From firsthand experience, the vehicles on the road — and the roads themselves — were larger than I expected, so smaller cars aren't needed like they are in compact cities like Prague, Rome, or Paris. And there are times in traffic when a larger vehicle can show its dominance as road lines and markers in China are merely suggestions that most drivers don't opt to follow.
80% / 20%
People don't buy cars in China in the same way as Americans. People there tend to pay in cash, where a majority of Americans finance their car purchases. However, the General Manager of the dealership I visited mentioned that financing is growing and he has financed ~20% of deals this year. This is up from the ~10% from 2011. As the Chinese market matures and buyer profile diversifies, I predict this will change and the finance rate will grow higher. The 21% lease penetration rate we see here in the US is also another dramatically different data point, since leasing, for the most part, is non-existent in China. Buying a car you can actually afford at a given point in time.... what a novel concept, huh?
It was a stormy Tuesday afternoon the day of my visit, so there weren't many customers in the dealership, but the facility itself was as clean and modern as could be. It boasted an impressive 45 service stalls, 110 personnel, 1 baby grand piano (Elton John style), and a swank upstairs VIP lounge. Up until that point, I spent a majority of my trip on my feet or in a cramped vehicle stuck in traffic so the best 5 minutes I spent was in a hi-tech massage chair in the VIP lounge. That thing was gold and had a control panel that looked as if it could launch a spaceship. Considering how hard it is to win the Beijing license plate lottery, it's important to treat your customers right. And this chair did right by me, even though I wasn't technically a customer. If only it could have transported me back to Los Angeles.
Spotless Service Area
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Jessica Caldwell is the Senior Director of Pricing & Industry Analysis for Edmunds.com. Follow @jessrcaldwell on Twitter.