Globalization: Selling Cars in China

Globalization: Selling Cars in China

Despite the widespread nature of the global credit crisis of 2008, not all regions of the world remain mired in recession. Asia has shown signs of healthy growth. China is positively booming, compared to the rest of the world: "The Chinese media reported that retail sales in May, scheduled to be announced Friday morning, are likely to show an increase of 15.2%. That would represent a modest acceleration from April, when the increase from a year earlier was 14.8% and a robust gain when adjusted for the gradual decline in overall prices in China" (Bradsher 2009).

One of the biggest areas of growth retail sales in China has been in the automotive market, "with car sales rising briskly as the government has offered various subsidies, especially in rural areas" (Bradsher 2009). Unlike the short-lived but successful 'cash for clunkers' program in the United States, the Chinese government has pursued an ongoing, aggressive campaign to increase car ownership amongst its citizens. Many of these recent Chinese car owners are first-time car buyers, and are finally enjoying the fruits of many years of economic struggle. Establishing a presence in China is critical for a foreign automotive company, particularly given the current economic downturn in the West. Marketing in China could also buy a car company critical time while the rest of the wary world recovers. The American consumer is only gradually re-establishing the courage to buy large purchases such as a new car.

China is attractive as a new market because a foreign automotive company could be a 'first mover' in a rapidly expanding economy with shifting consumption patterns regarding car ownership. Chinese consumers are spending more on retail goods in general, and exports are down: Chinese exports plunged by a record 26.4% in May of 2009. The Chinese trade surplus was $13.39 billion in the same month, compared with $16.37 billion in may 2008. A government subsidy for car buyers makes the need to capitalize upon this moment in time even more critical for any company wishing to establish a market presence in the nation.

For the Chinese, cars represent both freedom and affluence. Despite its flagging fortunes at home, General Motors doubled its sales in China during the third quarter of 2009, compared with the same period in 2008 (Stoll 2009). Although GM may be associated with government bailouts and failure in the U.S., in China GM has been able to successful craft an attractive and affluent image for China's emerging financial elite. Significantly, when GM was forced to sell off its 'uber-luxury' brand, the massive Hummer, a Chinese firm was the first to 'bite.'

Marketing in China, GM's example suggests, requires a two-pronged strategy. To the affluent, the attractiveness of a foreign vehicle that can give the driver the luxury experience he or she has long desired but never possessed will be compelling. Driving a foreign vehicle connotes wealth and prosperity. To the rural population, who may desire more moderately-priced vehicles, the ideal of affluence, convenience, and affordable luxury can be the target strategy of the marketing campaign. Smaller vehicles must be touted to this population, and a savvy marketer can learn from Toyota's example. In contrast to GM: "Toyota's China sales have suffered this year after a failure to anticipate demand for smaller cars" (Stoll 2009).