Initial Quality in China Sets New Benchmark; Domestics Improve Significantly

Dr. Mei Songlin

China’s domestic brands are improving their initial vehicle quality and are narrowing the gap with international brands, which is reducing the overall problem rate in China to a record low, according to the 2013 China Initial Quality Study (IQS). At the industry level, overall initial quality averages just 119 problems per 100 vehicles (PP100) in 2013, which represents the lowest number of problems since the study was introduced in 2000.

The 2013 China IQS, which examines problems experienced by new-vehicle owners within the first two to six months of ownership, evaluates two general types of problems: design-related problems, and defects and malfunctions. Some 21,181 owners of new vehicles purchased between October 2012 and June 2013 in 46 major cities were surveyed for the study. The overall initial quality score for 2013 is determined by calculating PP100, where a lower problem incidence rate indicates higher quality. Continue reading ›

Shorter Vehicle Delivery Time Impacts Dealership Selection in India

India02Although dealer proximity is still the most influential reason for choosing a dealership in India, new-vehicle buyers cite immediate delivery as an emerging key consideration, according to our 2013 India Escaped Shopper Study (ESS). More than one-sixth (16%) of customers cite immediate delivery as the most influential reason for selecting a dealer, up from just 8% in 2009.

In addition, a longer delivery time is cited by new-vehicle buyers as the second-most influential reason to reject a vehicle that shoppers had initially considered purchasing. The interest in vehicle delivery is related to the final decision process. Once the decision is made and the payment and other processes are completed, new-vehicle owners want to immediately show off their prized possession. Continue reading ›

China’s Domestic Brands Mark Major Advance in Vehicle Dependability

Dr. Mei Songlin

Dr. Mei Songlin

For a second consecutive year, Chinese nameplates continue to close the gap with international brands in the long-term durability of their models, according to our recent 2012 China Vehicle Dependability Study (VDS). It’s also noteworthy that China’s domestic brands have made advances this year in both initial quality and in offering models that appeal to their new-vehicle owners.

Now in its third year, the 2013 VDS Study measures problems experienced during the past six months by original buyers of vehicles after they have owned their new models for 25 to 36 months. More than 14,100 new-vehicle owners from 37 cities across China were asked to evaluate their new vehicle in terms of 202 different problem symptoms in eight categories.*

This year, the gap in vehicle dependability between the country’s domestic brands and international brands has been reduced to 80 problems per 100 vehicles (PP100), down from 139 PP100 in 2011. Among China’s domestic brands, vehicle dependability in 2012 improves to an average of 250 PP100, vs. 327 PP100 in 2011. International brands also improve their dependability scores, averaging 170 PP100 in 2012, which is 18 fewer PP100 than in 2011. Continue reading ›

Domestic Brands Make Inroads in China New-Vehicle APEAL Study

Dr. Mei Songlin

Although international luxury brands—including Audi, BMW, Lexus and Mercedes-Benz—still achieve the highest scores in pleasing their new-vehicle owners, China’s domestic brands achieve a historic high in overall vehicle appeal, according to our 2012 China Automotive Performance, Execution and Layout (APEAL) Study, which examines how gratifying a new vehicle is to own and drive during the first two to six months of ownership.

After making major advances in initial quality this year, China’s domestic brands continue to make strides to narrow the gap with all international brands and earn an average APEAL score of 781 points (on a 1,000-point scale) with significant improvements in two major areas: audio/entertainment/navigation and seats.

It’s noteworthy that the average score for all international brands drops to 839 points from 847 in 2011, due to lower satisfaction in the vehicle exterior and storage and space categories. This drop in the average APEAL score of international brands negatively impacted the overall industry APEAL average score, which slipped 3 points to 822 points from a record high of 825 points in 2011. Continue reading ›

China’s Domestic Automakers Take a Hit, But Not All the News is Bad

Jacob George

After years of significant sales growth and business expansion, China’s domestic automakers have been on the receiving end of bad news in recent months. Some recent examples of stumbling blocks for China’s national automakers include:

• Year-to-date, the combined market share of China’s domestic automakers—which typically accounts for about one-third of annual passenger-vehicle sales—is down nearly 4%, in an overall market that is up 9%.

• In July, an influential automotive industry association predicted that more than half of China’s 48 domestic automotive brands (a majority have only been established in the last dozen years) would be discontinued in the next 3-5 years, principally due to foreign competition.

• In August, two of China’s leading domestic brands were forced to announce vehicle recalls in Australia (due to the affected vehicles containing the banned substance, asbestos). This recall prompted sober admissions of wrongdoing from the offending companies.

Certainly, these setbacks have been disappointing for a young industry racing to catch up with the world’s leading automakers. However, based on progress being made in other facets of the industry, there is still a major reason for optimism among China’s domestic brands. One area in which much progress has been made is initial vehicle quality. Continue reading ›

China’s Dealer Service Satisfaction Flattens after Major Expansion

Dr. Mei Songlin

Overall customer satisfaction with dealer service in China has reached a plateau after improving in each of the past 6 years, according to our 2012 China Customer Service Index (CSI) Study, which is based on personal interviews with nearly 14,660 new-vehicle buyers who visited their dealer service department between the first 12 and 24 months of ownership.

A possible reason for the lack of improvement this year is that automakers rapidly expanded their dealer networks in China during the past several years in response to tremendous growth in passenger-vehicle sales, according to our research. In 2011, for instance, the number of authorized dealerships rose by 14% from 2010. Many of these new dealerships lack experienced staff to provide quality customer service, while service facility scores also lag behind, based on analysis in our 2012 China Dealer Attitude Study.

Service Satisfaction Higher in Tier 1 and Tier 3 Cities

Our latest China CSI Study findings indicate that satisfaction with dealer service* is higher in the country’s larger Tier 1 cities** and Tier 3 cities than it is in Tier 2 locations. It’s interesting that customer communication with service advisors in these two regions is significantly better than in Tier 2 cities. Continue reading ›

German Brands Attract China’s New-Vehicle Intenders

Dr. Mei Songlin

More than one-third of consumers in China (35%) who expect to purchase a new vehicle in the next 12 months intend to buy a European model—in particular from a German brand—in comparison with just one-fourth (25%) of consumers who were in the market for a new vehicle a year ago, according to the J.D. Power Asia Pacific 2012 China New-Vehicle Intender StudySM (NVIS).

The study, which examines pre-purchase perceptions and consideration of more than 5,300 new-vehicle intenders in 59 cities of China, also measures familiarity and favorability of automotive brands with new-vehicle intenders in China. This year’s study finds more intenders aspire to own BMW, Mercedes-Benz and Audi brand models than in the previous year’s study.

Overall this year, German models have the highest consideration rates in seven of the 11 vehicle segments and are more popular, particularly in Tier 1 cities in China, compared with models of other European brands. According to the study, major reasons for considering German models include safety features; quality of workmanship; and durability and low failure rate. Continue reading ›

China’s Government Purchase Rules: A Sweet Deal for Domestics?

Jenny Gu

Earlier this year, China’s Ministry of Industry and Information Technology (MIIT) released its list of approved vehicles for government purchase. The list caused quite a stir because all 412 models included are from China’s domestic brands. International media have been critical of the list, and some have even said it violated WTO principles. Jenny Gu, senior analyst with LMC Automotive,* which has a strategic alliance with J.D. Power, points out that the policy is in line with public opinion in China, and does not violate WTO principles.

A few excerpts from Ms. Gu’s perspective in a recent issue of China Automotive Monthly—Market Trends about the reality and ramifications of the new policy are highlighted:

“This policy is in line with public opinion, whereby government purchases require greater scrutiny and more cost controls. After all, it seems unreasonable to use taxpayers’ money to buy luxury cars for a small group of public officials. However, to become a supplier of official vehicles in China, a company does not need to be a Chinese brand, but the three conditions are difficult for foreign brands to meet:

• Vehicles sold for official purposes, such as tax collection or criminal investigation, must have an engine size of 1.8 liters or below.

• These vehicles must cost no more than 180,000 yuan (US $28,571).

• The manufacturer must have spent no less than 3% of their core revenue on research and development in China in the past two years.

“The first two conditions block luxury brands such as Audi and BMW, which typically have large engine-displacement, expensive vehicles. However, it is the third condition that all foreign brands struggle to meet. Continue reading ›

The World’s Largest Auto Market Shifts Gear

Charles Mills

Currently, new-vehicle shoppers in China have the world’s widest range of choices, with 94 brands and 476 models from which to choose, according to our research and analysis with LMC Automotive.* That compares with fewer than 40 brands and nearly 100 fewer models available in the U.S. market, the second-largest automotive market in the world in 2011.

Entry-Level Segment Sales Hardest Hit in China’s Auto Market

In our overall analysis of global sales this year, we see that China new-vehicle sales in the first quarter of 2012 increased by just 2% from the same period last year. This sluggish sales growth has affected sales in entry-level vehicle segments more than other segments, despite a continued increase in retail gas prices in China. Fuel prices in China are now more than 20% higher than the average price in the United States. Continue reading ›

Foreign Automakers to be Impacted by China’s New Government Purchase Policy

Tim Dunne

From the perspective of political expediency, U.S. President Barack Obama isn’t really allowed to drive an Audi (or VW), and Germany’s Chancellor Angela Merkel isn’t allowed to drive a Cadillac (or Chevy). So why should Chinese government officials be any different?

China announced a new policy in February that government vehicle purchases would be restricted to Chinese domestic brand vehicles only, and that vehicles used for official operations (such as tax collection) could not exceed 180,000 RMB (US $28,500). According to media reports, total government spending on vehicles reached about $12 billion in 2011, and government purchases accounted for roughly 4.5% of all passenger-vehicle sales in China.

The new policy will likely make a significant dent in the sales of foreign brands operating in China—such as Audi, Volkswagen, Buick, Citroen, Toyota, Honda, Hyundai and others—as foreign-branded vehicles are currently estimated to account for 80% of all government vehicle purchases. Continue reading ›