Gasgoo.com: Which car segment do you think has a better performance?
John Zeng: C segment remains the mainstream of China auto market. It's very much different from other Asian countries like India and Japan. In 2007, the fastest growth still falls in the C segment, which is followed by D segment, B segment. The SUV and MPV market also grow significantly. Only A segment is flat.
Gasgoo.com: A segment's flat performance is due to the lack of new models in 2007 as you mentioned. I think another important reason might be our government hasn't really encouraged the development of small displacement vehicles.
John Zeng: It's true. The government has to have a thorough consideration. The prices of small displacement vehicles are usually so low that most families can afford to buy, but a vehicle is not only a personal property, but also takes up much public transportation resources, uses oil resource and affects public environment. The government has to consider if encouraging small displacement vehicles purchasing, the capacity of public transportation system can afford or not. The world's cheapest car ”Nano” in India also incurs some opposition.
Gasgoo.com: But large displacement vehicles have greater impact on the public transportation and environment.
John Zeng: Yes, but the cost of buying and maintaining a large displacement vehicle is much higher, so it will not become very prevalent.
Gasgoo.com: Maybe that is also because the regulatory and legal system is not well established in China. In the densely populated Europe, public transportation resources is also rather limited, yet Europe has very high per capita car ownership and small displacement vehicles gain great popularity.
John Zeng: Although China has lower per capita car ownership, broader city roads and four-lane highways, the actual capacity of transportation is relatively small compared with the developed countries, because our law and regulation system and transportation notions still fall behind.
Gasgoo.com: what drives the rapid growth of China auto market in 2007?
John Zeng: A basic issue is that the main vehicle consumption in China has changed from government-owned vehicles to privately-owned vehicles. There are still too many driving license holders preparing to buy a car. After the passenger vehicles in tier-1 cities like Beijing and Shanghai are almost saturated, tier-2 and tier-3 cities gradually become the main destination of vehicle consumption.
Gasgoo.com: Does the growth of tier-2 and tier-3 city vehicle consumption contribute to the sales of C segment vehicles?
John Zeng: Yes. Now in China, a car is still a symbol of social status. In tier-2 and tier-3 cities, a C segment vehicle has been good enough to show the buyer's status. While in tier-1 cities, D segment vehicle consumption is the mainstream.
Gasgoo.com: Would Chinese people's vehicle consumption notion change in future?
John Zeng: I think it will. The rapid growth of new car ownership will generate a large used car market. When used car buying becomes popular, a car would only be regarded as a transportation tool, not a symbol of social status. But it may take five to ten years for the symbolism significance to fade away in China.
Gasgoo.com: A unique phenomenon in China auto market is that the best selling cars are always the oldest models. In 2007 the oldest Volkswagen models put into China -- Santana and Jetta are the No.1 and No. 2 best selling cars. What do you think of that?
John Zeng: It is related with the growth of vehicle consumption in tier-2 and tier-3 cities. In those cities, most car buyers are buying their first car. They wish their first car be cheap both in the sales and after sales stages. And Santana and Jetta just match the needs. Santana and Jetta are much cheaper than the new models in the same segment. Having been in China market for over 20 years, it is much easier to find an aftermarket service for Santana and Jetta, and the repair cost is much lower than the new models.
Gasgoo.com: In the China auto market, there are too many brands competing, and many new models put into market. But not many are remembered by the consumers.
John Zeng: Yes. Almost all the auto makers have entered the China market, and China itself has dozens of auto makers. Consumers have little recognition on so many brands, and brand loyalty is relatively low.
Gasgoo.com: Could you give us a forecast on the 2008 China auto market?
John Zeng: Our forecast on the 2008 China auto market is more conservative than last year. The growth rate of overall vehicle market would be about 17%, in which commercial vehicle market would grow slower. But even with this speed, China's auto sales in 2008 would be over 10 million.
Note:
In China, tire-1 cities in China usually refer to biggest cities in China -- Beijing, Shanghai, Guangzhou, and Shenzhen.
Tier-2 cities usually refer to the other provincial-level cities such as Chongqing, Tianjin, Chengdu, Nanjing, Wuhan, and the sub-provincial-level cities, such as Dalian, Qingdao, Ningbo, Xiamen.
Tier-3 cities usually refer to the prefectural-level cities and the smallest level cities -- county-level cities.
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