This is a post from PRISM’s Social Army – regular briefings on topics aligned to our business or close to our hearts. Today’s entry is from Leona Leung from PRISM’s Shanghai office.
Looking ahead into 2017, the automotive industry in China continues to evolve at incredible speed. It’s not even just about vehicles anymore. It’s as much about apps, the environment and of course that perennial Chinese issue of who has the most ‘face’. Here’s why…
Apps are increasingly the way everyone gets things done in China. It’s no surprise that, just like in the West, apps are the way people order cabs, find the perfect route, check traffic updates and pay for gas. The difference here are which apps. Google Maps is not an option here, due to ongoing wrangles between Google and the Chinese state, so we use Baidu Maps, instead. Chinese drivers use it not only to tell them where they are but to show them the best route to their destinations (least traffic and least time), and what to do on the way if they need to grab something to eat or anything else. Baidu Maps is now one of the most important apps in daily life.
The other staple app of daily life that few in the West have heard of is WeChat. It’s an instant messaging app with phenomenal penetration into the Chinese market, but people also use it to pay for goods and services, follow brands, create and share content, download discounts and find friends. It can even be used for dating. WeChat also now provides road tips so users can find their way around China’s clogged cities more efficiently.
Talking of clogged cities, pollution is now officially recognised as one of the most pressing issues facing China, and the government is enacting traffic policy in an attempt to manage it. In major cities like Beijing and Shanghai, during peak times and governmental conferences only cars with certain license plates are allowed on major roads. For example, one day cars with licenses that end in an even number are allowed to use the highways, the following day, those with licenses that end in an odd number.
The government has also passed new laws for electrical cars, including free license plate registration for new electric vehicles. In major cities, license plate registration can cost up to US$10,000 for each new car, so this represents a major incentive for Chinese customers to go electric.
In 2016 we saw GAC, a massive Chinese automobile manufacturer and Fiat Chrysler’s primary Chinese partner, widely celebrated for its GS4 SUV, which won a gold medal from the China Eco-Car Assessment Program, making the GS4 the first SUV to receive a gold medal, and the only model by a Chinese brand ever to win one.
Chinese car buyers still like big, impressive cars – especially SUVs. They mean more space for relatives and extended families, more comfort for those long urban traffic jams, and more prestige on the roads – satisfying that ever-present Chinese desire for maintaining ‘face’, or the perception of a high position in the social hierarchy.
Automakers such as GAC are successfully catering to that Chinese desire for large vehicles, but adding ecological engines that make SUVs more palatable (and affordable) to a consumer increasingly concerned with environmental pollution.
The automaker that designs a true electric SUV for the Chinese market – that’s the brand that will truly corner the market in 2017 and beyond.