Monday 14 January 2008

Big cars in little China

China is falling into the classic development trap of excessive materialism as consumers demand larger and larger cars even in the face of limited space and higher fuel costs. Capitalism has a this way of changing the character of all creeds and colours.

Chinese lose enthusiasm for smaller cars [FT]

The “people’s car” might not find a warm reception in the People’s Republic.

While Tata Motors hopes that its new $2,500 Nano model will bring vehicle ownership to the Indian masses, car-buyers in China, the most dynamic market in the world, have lost some of their enthusiasm for small, cheap vehicles.

Industry figures to be released this week will show that the growth of sales of smaller-engined vehicles fell sharply last year in spite of a continuing boom in the overall car market, which grew by about 24 per cent.

The conventional wisdom in the car industry is that large, developing economies with rapidly expanding middle classes buying their first cars should be fertile territory for small and affordable vehicles. That is what Tata is hoping for in India and that is how carmakers have prospered in emerging markets from Brazil to Thailand.

However, industry analysts say China could be following a different path. Car ownership is growing at a rapid rate – turning China into the second largest market in the world.

But, after flirting with smaller vehicles, Chinese consumers are trading up.

The unique role of "face" in Chinese culture is partically to blame:

“If Chinese can afford a higher-level car, they will go for it, even if it means borrowing money from their family. Image is much more important in China, especially compared with India.”

Research by Volkswagen last year found that average Chinese carbuyers spent twice his or her annual salary on the vehicle. Two years ago Su Tianping, a junior manager at Pudong Development Bank in Shanghai, bought a QQ, the microcar made by Chinese company Chery, which was a sales phenomenon in 2005. However, he sold it a few months ago.

“It was OK to drive around home,” he says, “but driving a QQ to clients or to a party was a loss of face.”

In a related post comes a news piece the like of which we may see more of from China:

Nine killed, 52 injured in central China highway pileup[People's Daily]

Nine people were killed and 52 others were injured in a pile-up involving four motor vehicles on a highway in central China's Hunan Province in the early hours of Monday, said local police.


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