CV makers must know consumers when entering PV market

After  forecasting that Chinese commercial vehicle(CV) market would maintain growth amid the global financial crisis, Klaus Paur, Regional Director of TNS North Asia, pointed out the directions in which Chinese CV makers could follow when they entered the PV market in an exclusive interview with gasgoo.com.

Gasgoo.com: After FAW, Dongfeng, ChangAn, Huachen, these traditional commercial vehicle manufacturers, entered passenger vehicle market at the end of the 20th century. Recent years, many other commercial vehicle manufacturers in China are going into the passenger vehicle market, and they don't have or choose to have an international car maker as a joint venture partner. For example, Jianghuai Automobile Corporation (JAC) itself launched its car model "Binyue" and "Tongyue" this year.

Why recent years these companies are crushing into passenger vehicle market in which the competition is more and more tough?

Klaus Paur: In fact, the Chinese passenger vehicle market offers a huge potential of growth in the coming years, and the decision to enter this market is based on a natural logic of diversification for these companies. They can grow their own businesses by complementing their current activities in the same industry, and certainly hope to be able to benefit from their experiences gained in the commercial vehicle market. Above all, they don't want to miss their share of the huge market that China's passenger car market is thought to be in the future.

Gasgoo.com: Do you think they can succeed in the passenger vehicle market?

Which kind of commercial vehicle manufacturers have a larger possibility of success in passenger vehicle market?

Klaus Paur: As we can see in the current market development, Chinese independent car manufacturers face a huge challenge to succeed in the passenger vehicle market. The reason for this is that the market dynamics is that of a highly competitive buyer's market, in which consumers have a huge selection of products to choose from. To attract car buyers, the products of Chinese vehicle manufacturers have to be competitive in the first place. This means, quality must be high to exist among all the foreign competitors.

But the second thing is that buyers of private passenger cars are much more irrational in their behaviour than buyers of commercial vehicles who decide on rational rather than on emotional elements. So if you focus too much on technical specifications and neglect emotive needs, you won't succeed in the passenger vehicle market. Therefore, if for example a producer of light buses decides to enter the passenger vehicle market by offering MPVs it is not sufficient to only modify the product itself. You need to tackle the tangible and intangible aspects of consumer needs.

Gasgoo.com: How can they succeed in the passenger vehicle market? If they want to succeed in the passenger vehicle market, what characteristic or capability should the companies have, or what should they prepare before they enter the passenger vehicle market?

Klaus Paur: Before entering the passenger vehicle market, one of the major tasks for commercial vehicle manufacturers in China is to recognize the importance of emotive needs in the purchase process of passenger cars, and to align the mindset accordingly. Consumers do not only buy a car for transportation purposes, but they also want to demonstrate their economic achievements and show off their success. Nowadays, the young consumers also indulge themselves in their car usage and seek fun and pleasure. All this has consequences in product development as well as brand building and the entire marketing strategy in general. As the Chinese market moves so quickly, it is already difficult to follow the trends and tendencies for the renowned car manufacturers, and I guess it will be even more difficult for commercial vehicle makers which do not yet have too much experience in the passenger car market.

Gasgoo.com: Which segments of the passenger vehicle market should their products target for? Should they going to the lower-medium segment? Or more specifically, the A segment, B segment, C segment, D segment..?

Klaus Paur: Ultimately, to be successful in the long term, passenger car manufacturers should be able to cover all major segments in the market. This is what makes companies like Toyota and Volkswagen so powerful. However, the higher the segment, the more challenging it will be to attract consumers, not only in terms of technological offerings but also in terms of brand proposition. This is why most mainstream brands are operating in the premium and luxury segment with distinct brands, such as Toyota with Lexus, and Volkswagen with Audi. And this is why FAW never really succeeded with its Red Flag. Product quality and brand power could never really compete against Mercedes Benz, BMW, and Audi. To build up credibility, newcomers in the market will probably have to pass by the lower market segments, and then in the course of development step by step trade up. But this will take time and requires a committed long-term strategy. The Japanese car manufacturers have done so when they entered the European market in the 1970's, and it took them decades to accomplish a strong position in the market. But don't forget, at that time they were already experienced passenger car manufacturers in their own country. Chinese car manufacturers, and in particular commercial vehicle manufacturers-turned into-car makers still have to conquer their own market.

Gasgoo.com: How can their experience accumulated and supply chain established in the commercial vehicle market help them fighting in the passenger vehicle market? Would that be helpful or useless?

Klaus Paur: Technological experience of manufacturing and selling commercial vehicle is one thing, producing and successfully marketing passenger cars another. From conception of the vehicle to its final handover to the client the challenges in the market are different, and it needs entire focus on comprehensive consumer understanding to build sustainable success.

Klaus Paur, Regional Director of TNS North Asia, has over 20 years of experience in marketing and market research, 13 of which have been spent specialising in the automotive industry. Prior to his current role in China, Klaus worked at TNS Automotive headquarters in Paris where he directed a major research programme across Europe and Latin America analysing automotive advertising effectiveness.  Heading up the automotive research practice for TNS in China since 2003, Klaus also holds responsibility for business activities in Greater China and Korea, and plays a co-ordinating role within the entire TNS North Asia Region.