Consumer demand for new energy vehicles is shifting from policy driven to individual needs driven; Gasoline-electric hybrid cars are more in demand, with large potential in the next five years; New energy vehicle owners are young, highly educated, middle-class
Beijing- July 10, 2016- Driven by the government’s subsidies, sales of new energy vehicles saw explosive growth last year. This momentum has been maintained in the first half this year. Statistics from The China Association of Automobile Manufacturers shows that about 126,000 new energy vehicles were sold in the first five months in 2016, up 134.1% year-on-year. However, according to Nielsen’s latest report, 2016 Chinese Automobile Consumers White Paper, new energy car sales growth might slow down in the latter half this year, as the government cut subsidies and reduced car-purchasing quotas in big cities.
The report also found that with Chinese consumers’ rising awareness of environmental protection and a more diversified range of products, consumer demand for new energy vehicles are shifting from policy-driven to individual demand-driven. At the meantime, gasoline-electric-hybrid vehicles are most sought after among all types of new energy cars.
In order to provide companies with insights into the new energy vehicle market and to help auto manufacturers make wise production, sales and marketing decisions, Nielsen and the China Association of Automobile Manufacturers jointly released the 2016 Chinese Automobile Consumers White Paper, which offers car dealers and industry experts comprehensive understanding of the landscape and development trend of China’s new energy car industry.
HYBRID CARS BECOME MAINSTREAM
Consumers have showed stronger interest in buying new energy cars year-by-year. According to Nielsen’s report, 14% potential car owners will consider pure electric vehicles and up to 22% will consider plug-in hybrid cars. Consumers’ increasing acceptance of new energy vehicles and awareness of environmental protection will become the driving force of future sales increase.
For those who are actually considering buying a new energy vehicle, the most popular type is gasoline-electric hybrid car (50%), followed by plug-in hybrid cars (?%) and pure electric cars (%). This is because gasoline-electric hybrid cars can save car owners the trouble of charging while still being environmental friendly.
However, sales of gas-electric hybrid cars have been less than stellar, as only about 20,000 were sold during the first four months in 2016. This is due to the lack of encouraging policies, limited product models and insufficient promotion. However, Nielsen believes that gasoline-electric hybrid cars will dominate the future new energy vehicle market as more types of gas-electric hybrid cars, especially SUVs will be launched.
“Hybrid cars will be the driving force for sales growth, while the market for electric cars, limited by the lack of infrastructure and other factors, still need more time to develop. We will surely realize that in the future,” said Yan Xuan, president of Nielsen Greater China.
Larger and more expensive electric cars are becoming popular. Last year, 63% of the electric cars sold were small and compact cars that retail for 50,000 to 80,000 RMB (with subsidies). Nielsen research shows that 51% and 53% of potential new energy vehicle owners are considering buying medium and large-sized cars. In the future, middle and high-end cars, as well as SUVs are going to have a larger share in the market.
FROM POLICY-DRIVEN TO INDIVIDUAL NEEDS-DRIVEN
In terms of purchase motivation, Nielsen found that 42% of potential owners consider new energy vehicles for environmental protection reasons, such as low emission. More than 40% said cost saving was a consideration, while only 30% said government subsidies was a factor. Environmental protection has surpassed price and subsidies to become the main driving force for new energy vehicle purchases. According to Nielsen, nearly 33% consumers believe that “new energy vehicles are the future”.
However, we can’t ignore the impact of government subsidies. Nearly 50% of the respondents said that subsidies still matter a lot. But a quarter of the consumers said they will still consider new energy vehicles with smart internet services or creative functional design even if subsidies were cut in the future; another 25% respondents don’t think subsidies matter. Safety features and improved charging infrastructure will raise consumers’ willingness to buy new energy vehicles. Most new energy vehicle dealers believe that, with the development of technology, the cost of new energy vehicles will reduce and reduced subsidies will not impact vehicle price greatly.
Affluent and educated are major potential new energy vehicle owners
Current new energy vehicle owners are mainly white collar, mid-level and senior leader positions. Most of them were born in 1970s and have higher incomes than the average potential buyer. More than half (52%) of the current owners are aged between 31 to 40. Almost ninety-percent (87%) of these consumers have average monthly household incomes higher than 10, 000 RMB, with an average of 30, 000 RMB.
Among these potential new energy vehicle owners, consumers who born in 1980s account for more than 50%. Most of them were considering buying their first car. What’s more, Nielsen found that 32% of potential new owners are female. More than 70% of the potential owners were married and have children; 74% have a bachelor degree and their average monthly household income was higher than 10,000 RMB. These affluent, young, educated people, will become the consumer base for new energy vehicles.
People from different tiers of cities have different preferences for new energy vehicles. More first-tier city consumers consider purchasing less popular car types like coupe/sports cars and MPVs; five-seat and seven-seat SUVs are more popular in second tier cities; most consumers in third or fourth tier cities still prefer sedans.
Customers who prefer plug-in hybrid cars prefer sedans. Those who prefer gas-electric hybrid cars tend to choose SUVs while electric car lovers say they would like to buy a hatchback
In recent years, traditional auto manufacturers have entered the new energy vehicle market along with many ecommerce companies.. According to Nielsen research, customers are quite open to new energy vehicles made by online companies. Nearly 60% of the respondents who said they would consider buying new energy vehicles said they that they would consider domestic internet-company-made cars, while more than 50% look forward to cars produced by global internet companies.
Chinese consumers demonstrate a clear interest and openness to alternative energy vehicles. This brings a challenge to auto manufactures: Should they should stick to simplicity and pursue a super car that can provide a better experience, or meet consumers’ diverse demands and provide multiple choices. This question used to trouble the mobile market and now it is the automotive industry’s turn to face it.
DIVERSE SELLING CHANNELS AND CHARGING METHODS
This January, five ministries released New Energy Vehicle Charging Infrastructure Incentives. After that, more and more new energy vehicle companies have shifted their focus from the eight cities that have car-purchase restrictions to heavily polluted regions, as well as the central region. Where are the major markets for new energy vehicles in the future?
Based on 31 factors including population density, economic growth, citizen incomes, expenditure, housing and car ownership, Nielsen predicted the potential of 286 cities for the next 10 years. Five distinctive markets have impressive car ownership rates and demands making them the most promising markets for alternative energy and smart vehicles. These five markets include mega cities (Beijing, Chongqing, Guangzhou, Shanghai, Shenzhen, Tianjin), developed cities (Quanzhou, Suzhou, Ningbo and other 18 cities), satellite cities (Jinhua, Zhuhai, Yangzhou and other 8 cities), industrialized cities (Zhengzhou, Hefei, Dongying and other 27 cities) and regional booming cities (Kunming, Harbin, Nanning and other 6 cities). Altogether, there are 79 cities in these five groups, including large and medium sized developed cities as well as third and fourth tier cities with geographical advantages. These cities still need to build retail and service networks in many areas.
In the future, diverse sales channels will be used in different levels of cities, including 4S stores, satellite stores, online stores and auto shows.. There will also be diverse solutions for charging options.
The most widely used charging solution is to build charging stations at the community, using charging cables. Current car owners also hope to build charging stations at companies, shopping malls and super markets. Hybrid car owners, expressed the preference for charging spots within 24 minutes by car from their home, while electric car owners preferred a charging station within 10 minutes by car.
ABOUT NIELSEN
Nielsen Holdings plc (NYSE: NLSN) is a global performance management company that provides a comprehensive understanding of what consumers watch and buy. Nielsen’s Watch segment provides media and advertising clients with Total Audience measurement services for all devices on which content — video, audio and text — is consumed. The Buy segment offers consumer packaged goods manufacturers and retailers the industry’s only global view of retail performance measurement. By integrating information from its Watch and Buy segments and other data sources, Nielsen also provides its clients with analytics that help improve performance. Nielsen, an S&P 500 company, has operations in over 100 countries, covering more than 90% of the world’s population. For more information, visit www.nielsen.com.