To attract young car buyers, build your brand first

SHANGHAI -- Last weekend when I was walking on the street near my home in Shanghai, I was surprised to see three Nissan Tiida whizzing past within about 10 seconds.

Thanks to strong hatchback buying by young consumers, the long sluggish subcompact segment of China's auto market is finally booming.

Does that mean new opportunities for all automakers who sell hatchbacks? Not necessarily. To win the hearts of the young, brand building holds the key.

Nearly 145,000 subcompact cars were sold in China in May, up 17 percent year-on-year, according to Automotive Resources Asia (ARA), an affiliate of J.D. Power & Associates. Hatchbacks, part of the subcompact segment, are growing even faster. 

Buyers of hatchbacks are predominantly the "post-1980" generation, say market research companies. That is true. When you look into a hatchback, you mostly see a young face at the wheel.

The post-1980 generation in China refers to people born in the 1980s. Compared with older generations, they are the lucky ones. They were born after the Cultural Revolution, a great tragedy in the history of modern China, and after the planned economy times when almost everything was in short supply. 

And because the single-child policy was implemented in the late 1970s, they are also mostly the only child of their parents. That means when they choose to buy something, they often have the financial support of their parents.

The strong purchasing power of the post-1980 generation certainly appeals to automakers. To attract the young, they are racing to launch hatchbacks with trendy styling. By my count, auto manufacturers launched about 20 new and facelifted hatchback models in China in the first five months of this year.

Free of the social and economic constraints their parents were subjected to, the post-1980 generation wants to have fun and adventure; they value freedom and love fashionable and innovative products.

But above all, they are brand savvy. Living in a globalizing age and connected to the Internet, they are open-minded and keenly aware of the good quality and prestige of international brands.

My niece who works for a headhunting firm in Shanghai was born in the 1980s. She is looking to buy a car. 

"My plan is to buy a Suzuki Swift, because it is finely made and a well known brand; after I have more money, I will probably change to a Civic," she says. 

Domestic automakers have also launched hatchbacks. But lacking brand recognition, their models in general have difficulty attracting the young.

BYD, for one, launched one in late 2007. But the monthly sales of its hatchback declined from 367 units in February this year to only 66 units by May. 

Huge growth potential in the market by itself is no guarantee for sustainable success, says Klaus Paur, North Asia regional director of TNS, a market research company. 

"This is why brand building for car manufacturers is extremely important to be successful in the long term," he says.