The bells and whistles rang loud and the displays were as lavish as ever at China's premier auto show, which rolled into Shanghai last month.
But the mood was decidedly cautious as this once turbo-charged auto market shifted to a slower gear. With the Government attempting to engineer a soft economic landing, car sales have plummeted by 16 per cent in the first two months of the year. The dip extends a slowdown, which began last summer and saw full year car sales in 2004 slow to 15 per cent after almost doubling in 2003.
But the mood was decidedly cautious as this once turbo-charged auto market shifted to a slower gear. With the Government attempting to engineer a soft economic landing, car sales have plummeted by 16 per cent in the first two months of the year. The dip extends a slowdown, which began last summer and saw full year car sales in 2004 slow to 15 per cent after almost doubling in 2003.
At most, the market is expected to grow 10 per cent this year. "It has slowed compared to the increases it had in the past (but) if you compare it with any other country in the world, it hasn't slowed down." says Dale Sullivan, Chevrolet brand director at Shanghai General Motors. "You'll never have your 45 per cent increase ever again. The market can't grow that quick anymore."
That said, foreign car makers continue to beat a path into China. The latest being the Hyundai-controlled car maker Kia Motors which has agreed to plough in US$790 million for a new plant in east China, a market it expects will generate $20 billion in sales by 2010. The future may be rosy, but for now, marketers are sacrificing margins with price cuts to tempt wary consumers, who are far better informed today than they were just 12 months ago.
"We are being challenged to come up with new solutions. We must redo the way we do things," says Alex Reynolds, project manager at MindShare, which has the Ford account in China. "Before being big was enough. Now we must advance our thinking."
According to Reynolds, most car makers to date have pursued fairly basic advertising strategies in China. For product launches, marketers have basically blitzed consumers with advertisements in newspapers and on television.
All well and good except there is a sameness about the ads, according to critics. Indeed, as it has been pointed out, the creative has been decidedly uncreative: invariably a white car on a blue background, with the sell being heavy on the status a car brand can endow a buyer.
But the slowdown is forcing a change in marketing communications. especially as a globally recognised brand name hasn't spared some of the biggest marques. In the latest China Auto Industry Association report, Volswagen's two joint-ventures fell from the top two spots in the first quarter of 2004 to fifth and eighth place currently. "It's getting more like the US or the UK," Reynolds says. "An extra layer of creative thought is needed that hasn't been needed in the past."
When MidShare launched Ford's Mondeo in 2004, it banked on creativity for impact since the budget for expensive television spots was non-existent. Instead, the pair got Mondeo placed in a CCTV programme, complete with visible branding on the car and a trendy looking driver. Reynolds claims the impact was far greater than they would have achieved had Ford produced yet another big-budget commercial. And the Mondeo emerged as the 2005 Motor Trend Car of the Year in China.
Ford an its agencies also put great thought to achieve a bigger bang at the auto show. It eschewed the clutter of its competitors, opting for a simple presentation that underlined its core branding component in order to stand out.
Along with employing the Ford blue to underline the brand as big, strong and powerful, the car maker handed out 'seed cards' -- small pieces of marketing literature detailing its environmental efforts. The cards were embedded with seeds, which could be planted. Did the experiential strategy fly with consumers? Time will tell. For now, the debate on what really motivates the Chinese consumer continues to keep marketers awake at night.
Some believe that it is all about prestige and status. Others say price is key. Many see the customers reacting most positively to the abundance of accessories or options on offer. But there is no consensus, except to the extent that the vast majority of foreign car makers and their ad agencies see a highly volatile and very confusing market. "There's no brand loyalty, says Philippe Coquelle, director, client service automotive, ACNielsen China.
"We are studying to find the right approach," says Steven Wilhite, senior vice-president for marketing at Nissan. "It's a free, loose, wild environment. We are still experimenting to see what works and what doesn't."
Money is certainly an issue. While many companies would perhaps like to spend more ad dollars, most concede that an aggressive strategy of that sort just isn't possible while growth rates remain low. Coupled with this, the troubles facing American car makers make it difficult for them to justify higher spend. Even the Japanese companies, those most likely to spend vigorously through the slowdown, say it is now more than ever quality over quantity. Adds Wilhite: "It doesn't mean we are going to spend more money. We have to be focused, more laser-like."