By Bloomberg News March 10 (Bloomberg) — After 8.6 million Chinese bought their first cars last year, General Motors Co., Volkswagen AG and Ford Motor Co. are positioning themselves to compete for return customers. The number of car models in China’s showrooms quadrupled in the past six years, forcing companies to fight for attention by unveiling vehicles at the Imperial Ancestral Temple in Beijing and the Great Wall outside the capital, and by paying Olympic gold medalist Michael Phelps millions of dollars. “It is clear that brands are still in the forming process,” said Joerg Mull , chief financial officer for Volkswagen AG’s China unit. “One of the keys for success in China in the long run is brand building and brand establishment.” About 83 percent of Chinese buyers last year purchased their first vehicle, said the State Information Center, a research arm of the government’s National Development and Reform Commission. At stake for China’s more than 130 carmakers is winning loyal customers in world’s largest automobile market. Sales in the country surged 46 percent to 13.6 million last year, according to the China Association of Automobile Manufacturers . In the U.S. , sales slumped 21 percent to 10.4 million, the fewest since 1982, according to Autodata Corp. Biggest Getting Bigger This year, sales in China may rise more than 10 percent to about 15 million vehicles, Chang Xiaocun , head of the Ministry of Commerce’s market construction department, said Jan. 29. Customers choose from 221 models, more than double the total of 2008 and more than quadruple that of 2004, the manufacturers association said. “You’ve got to create the right image, you’ve got to market it aggressively,” General Motors’ China President Kevin Wale said after the company and Chinese partner SAIC Motor Corp. launched their Buick Excelle XT in Shanghai with musicians, videos and a contemporary dancer bathed in red and purple lights. “As competition increases, you need to be more creative, more innovative in the way you get to your customers.” China requires overseas carmakers to work with local partners, who must own at least half of the joint ventures. The most popular car produced by these partnerships was the Excelle , which sold 241,100 units last year. Buffett’s BYD The overall best-selling car was the F3 compact from Shenzhen-based BYD Co. , whose minority investors include Warren Buffett . Sales totaled 291,000. Car buyers in China tend to be younger than those in the U.S., Wale said, so the Internet is a key part of an automaker’s marketing strategy. The average Buick customer in China is 28, married and a college graduate. His U.S. counterpart is 66 and doesn’t have a degree, General Motors China said in an e-mail. China is the world’s largest Web market with 396 million users last year, according to New York-based EMarketer Inc. That number will grow to 840 million, or 61 percent of the country’s population, by 2013, EMarketer forecasted. “Chinese consumers are really Internet savvy,” said Nigel Harris, general manager of Ford’s venture with Chongqing Changan Automobile Co. , which is increasing its marketing spending by more than 10 percent. Olympian Endorsement “They talk to each other through the Internet. Word of mouth is really critical in this market.” Companies place ads on social networking sites and use billboards and posters that redirect 3G phones to Web sites when photographed, Harris said. GM’s partnership spent 10.99 million yuan on online advertising in December, the most among car companies, according to IResearch Consulting Group , a Beijing-based organization studying customer behavior in Internet media. Its “more energetic” campaign of Web videos , pop-ups and banners targets consumers 25 to 40 years old, Wale said. FAW-Volkswagen Automobile Co. , a joint venture involving Changchun-based China FAW Group Corp. and Volkswagen, of Wolfsburg, Germany, came in second, spending 10.81 million yuan. Mazda Motor Corp. based in Hiroshima, Japan, aimed for younger drivers by hiring Phelps, who won a record eight gold medals in swimming at the Beijing Olympics in 2008. Its China venture paid him 20 million yuan ($2.93 million) to endorse the Mazda 6 sedan last year. Used-Car Salesmen It was the largest single sponsorship in China for a Western celebrity, Dynamic Marketing Group’s DMG Entertainment unit said when the deal was announced in January 2009. Other celebrity endorsers include movie stars Jackie Chan and Zhang Ziyi , and Olympic champion Liu Xiang . “Brand loyalty is not as strong as you see in other countries,” said John Bonnell , senior director with J.D. Power Asia Pacific in Bangkok. “There is a feeling of experiment and a feeling of interest in new, hot models.” Automakers also are focusing more on used-car sales, which rose 28 percent last year to 4.1 million units, according to the Ministry of Commerce. Daimler AG and Bayerische Motoren Werke AG are building dealer networks to entice customers to trade in old models for new ones and to try to make luxury cars more affordable. Daimler AG started its Star Elite network in November and plans to have as many as 30 second-hand dealers in China. Changan Ford plans to open as many as 18 used-car outlets by June, Harris said. “That will certainly build brand loyalty,” he said. “It’s going to help customers considerably if you have a good way to handle the used-car market.” — Tian Ying in Beijing and Stephanie Wong in Shanghai. Editors: Michael Tighe , Bret Okeson . To contact Bloomberg News staff for this story: Tian Ying in Beijing at +86-10-6649-7571 or ytian@bloomberg.net ; Stephanie Wong in Shanghai at +86-21-6104-7029 or swong139@bloomberg.net .
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Mazda Mining Phelps’s Chinese Gold as Automakers Press for Brand Loyalty
