Vying for China's young auto-buyers is heating up

Shanghai, May 12 (Gasgoo.com) China's bicyclists and rural families are moving to small, basic vehicles; young professionals buying small sedans and luxury vehicles, and successful entrepreneurs fueling the rapidly expanding luxury market.

Already, wealth in the consumers is beginning to percolate down the age bracket to the high-educated young groups in China's second- and third-tier cities and even to its more rural entpreneurs.

Until now, most growth in personal wealth -- and therefore automotive sales -- has been in the managers and officials closest to the coast. But as wages rise in those larger younger consumer demographics, some car manufacturers are catering to the increasing number of Chinese new parvenus.

GM China Group president and managing director Kevin Wale said that worldwide, the annual income that typically moves a household into the realm of car buying is $5,000, but in China, he said, it's closer to $3,000. And experts say the average incomes of young people in many of China's large- and mid-level cities is now approaching that level.

Just a year and a half ago, Hao Chen, 27, bought his first car, a practical vehicle. Now he is looking for a second, sportier and more comfortable car.

"Five or six years ago, 60 percent to 65 percent of car sales were to government fleet," said Joseph Liu, executive vice president of GM China group. "Now, it is reversed. 60 percent to 65 percent of sales are to private buyers, mostly aged 25-40."

In China, 60% of the Ferrari buyers are aged less 40, centering around the 36 years old group, and 25 of the buyers are younger than 30. Globally, the buyers of Ferrari is 45 years old on average. As a whole, the Chinese buyers / users of Cadillac are also younger than those in the United States.

And automaker is scrambling to win them over. GM, whose joint ventures were the first to sell more than 1 million vehicles in a year in China, showed 42 models at the 2008 Beijing auto show, including the new Buick Invicta concept car. The Invicta, which was unveiled on April 19, was designed mainly to cater for the young consumers in China.

Ford had the largest stand in the history of the Beijing auto show, with 55 vehicles on show. On the automaker revealed its next-generation Ford Fiesta five-door hatchback for China's young audience.

Chrysler is looking to create more partnerships in such rapidly growing markets as China. The automaker showed 19 vehicles in Beijing last month, including the Asian debuts of the Dodge Journey, the two-door Wrangler and a special edition 300C.

China's domestic automakers were out in force as well in the 2008 Beijing auto show, with Chery Automobile -- the nation's largest domestic auto manufacturer -- showing a full lineup of everything from subcompacts to an SUV targeting the young consumers.

BYD Auto Co plans to unveil its own plug-in electric vehicle, aiming for sale in 2010. Geely Automobile Co says it plans to show several larger models with more luxurious styling.

Some experts said they have seen young car-buyers -- who primarily pay in cash or cash equivalent -- put off a car purchase as long as a year so they could get a vehicle more stylish, comfortable and luxurious than what they can afford today.

As Chinese consumers, mostly young buyers, become more discriminating, China's domestic automakers will have to improve their quality or unwittingly give up their places in the market, analysts say.

"It is a market in which everyone (as young people) wants to play," GM's Wale said. "It is the most important market in the world."