As part of the
Renault Nissan Discovery Tour that Team-BHP was recently invited to, we were treated to an insight about the what the asia car buyer wants and how India is well placed to play an important part in this. This insight was provided by an independent analyst - Michael Dunne
For those who Asian car trend watchers, it is impossible not to know about Michael Dunne. Michael was the vice president for Asia Pacific for J.D. Power and Associates till 2010. J.D Power acquired his original company Automotive Resources Asia which he had founded in 1993. ARA assisted automakers and suppliers entering and competing in car markets across Asia.
Michael writes monthly columns for the Wall Street Journal and Automotive News. He has given various keynote talks at investor conferences in London, New York , Milan, Singapore and Tokyo since 2003. He has spent considerable time in China, Thailand and is currently based in Jakarta.
The topic of discussion was about the car buyer in the emerging market. This is the next wave of growth for the automotive industry.
It all began with an anecdote about how he started his automotive life in the US with an old Honda Accord for $1600 and he got a culture shock in Thailand where the same car cost new $30000 coupled with a 3 month wait and cash down upfront. The way people are willing to pay big money for cars in Asia show there is so much demand and aspiration. His neighbor in Jakarta spent $140000 on an ML Merc and yet uses it for the weekend,
The question is what does the consumer, in emerging markets want and also with so many competing brands, how do you satisfy them and keep them loyal?
At present, manufacturers have only tapped the aspirational demands, not the real demand.
Some basic statistics, Asia has a potential market of 3.1 billion motorists. 95%of these people are on two wheelers. Once would think that the Nano is the obvious follow-on choice.
Michael was of the opinion that the Nano is stranded in No Mans Land and mistakenly positioned as a glorified motorbike or a downgraded car. The marketing and positioning required never supported anything else. Looking at the Asian market as a percentage of global car sales, from what was 15% during the year 2000, the Asian market accounts for 50%. It is projected to touch 67% by 2020.
This poses the question on how? If not the Nano, how are other countries approaching this.
China has no middle class, either you are wealthy or you are not.
Source
The main profitable market are the wealthy elite in city who want expensive quality cars. Even the Chinese have not fully accepted Chinese brand cars.
Thailand's best selling car is a pick-up truck
Source
Thailands economy is primarily agriculture based hence for pick truck. Hence this has evolved as cars disguised as trucks, which cost upto $30000. This means again, the only the elite are the car buyers.
Indonesia love mini MPV's
source
The minivan comprises of half the market at an average cost of $15000. This not the cheap car market
When he came to India. He put up the best selling car in India
India is a place where the average person prefer to invest elsewhere. The Indian government has done the right thing to direct demand towards small cars. India is far ahead on this and is being smart to avoid dependence on imported oil.
Once average incomes take off beyond $4000 per annum, this is the inflection point to drive car ownership.
India has done the right things by focusing on frugal engineering, becoming the centre of excellence for small car design. Rather than continuously impose existing models, it is importance to design new products for existing markets as opposed to impose old functional designs.
The example of the Wuling Sunshine – global 4th best selling car. It is not the best but technically meets the need for large space in a smaller footprint.
Source - manufacturer
So, what is required to win in emerging markets which will account for 80% of global market in 2020?
The basic criteria is that cars will need to be affordable and cost <$10000 and have a fuel economy greater than 20 km/l
However to win in such a market, cars need the following:
- Cool features
- A brand that consumer trust
- Feature space and connectivity as cars are the second living room
- Small SUV or crossover
Nissan are using Datsun as a brand revival to open up a new segment by promoting affordability. Datsun is Nissan's question of survival. Manufacturers need to take these risks to survive and take a risk in designing for the market.
Some other snippets from the session: :
- India - potential to be export base, growth is transparent and more realistic.
- China - 50, 50 joint venture poses risks since no control on funds, IP and lack of transparency. A lot of invesntment went in as a result of herd mentality. $40 billion was sunk in wiouth any accountability.
- Indonesia - shaky due to political issues, might be a potential market in 5-10 years.
- Thailand is a very good manufacturing base but Indonesia is a better market
- Car sharing is only suitable from affluent cities. There is also the trust and aspiration factors.
- Tata heading right way in reviving the Nano by making it aspirational
- Colours make a big impact
- Connected car is huge growth area
- Development of engine and transmission will not be as radical compared to the connected environment in the car.
- Cars could be getting duller. People used to connect through cars but now people connect out of the car than with the car