TNS Automotive Blog

Big is beautiful too!

says Pradeep Saxena, Head of Automotive Research, TNS India

As in previous years, the 11^th edition of the Delhi Auto Expo which took place last month attracted a crowd of over 100,000 on peak days. The one big difference from past editions however, was in terms of the models being displayed which stand a good chance of being launched in India.

The Indian car market is dominated by both small size and small price vehicles

The popularity of the small-car segment on the Indian market is well known. What is less understood though is that small doesn’t only translate into size but also into price: whatever car model is available for a small price flies off the shelves.  As a result, the Suzuki Dzire, a sedan which sells at US$ 12,000, and the Mahindra Bolero, a MUV priced at US$ 14,000, consistently feature among India’s top 10 best selling cars, despite neither of them qualifying as small-sized cars.

Every major car manufacturer - with the exception of Mahindra - has a small hatchback and at least one successful sedan in its portfolio; however few are those who offer a SUV or MUV worth raving about.

The 2012 Delhi Auto Expo showcased a surprisingly high number SUVs and MUVs

The most successful models in India’s currently under-developed (yet fast-growing) SUV market, range from US$ 21,000 for the Tata Safari or Mahindra Scorpio, to US$ 48,000 for Toyota Fortuner.

The Auto Show this year revealed a first-time interest for global car makers in the lower-price band: Ford (EcoSport) and Maruti Suzuki (XA Alpha) both displayed SUVs priced at around US$ 20,000, with the launch of the EcoSport scheduled for early 2013. Meanwhile Indian manufacturers are set to venture into the mid-price band; Mahindra is planning to launch its SsangYong’s Rexton which will sell at around US$ 36,000.

Among the MUVs unveiled last month, the Stile by Ashok Leyland and Ertiga by Maruti Suzuki will both hit the Indian market at around US$ 20,000.   

So, what is spurring carmakers to focus on SUVs and MUVs?

Car manufacturers are relying on India’s multi-generational households to fuel growth

Almost half of Indian car-buying households either purchase an additional vehicle or replace an existing one – and 15% of these households opt for a SUV or MUV.

India is a country where multi-generational households continue to prevail, as Oprah Winfrey found out during a recent visit: she was astonished to learn that Abhishek Bachchan, one of India’s biggest film stars, still lived with his father - even after marriage!

Such a household obviously needs to purchase a larger vehicle to accommodate a higher number of passengers.  When buying an additional car - be it for a family or individual need - the combined disposable income of its members also means that it can actually afford a SUV or MUV. As most of these models come with diesel engines, their lower running costs make them even more accessible.

However, for most Indian middle-class households, US$ 20,000 remains the maximum amount which they’re prepared to spend on a new vehicle.

Whether car manufacturers succeed in luring them into breaking this ceiling, with the launch of these attractive SUVs unveiled at the Delhi Auto Expo, remains to be seen… 

Tarnished El Dorado needs new polish

says Guillaume Saint, Senior Director, TNS Automotive China

The Chinese market has been seen as the El Dorado of the automotive world. Following several years of sharp increases in new car sales that delighted manufacturers, the pace of growth has somewhat slowed. The prospect of double-digit growth in the coming years is no longer a given.

In recent years, the major challenges for auto manufacturers were to turn out enough cars to meet very strong demand and to expand dealer networks to ensure that no sales opportunity would be missed.

Intense competition

The situation is now changing, and whilst the country became the focus of so much attention - with every car manufacturer wanting to be in the China market - the competition quickly intensified: in 2011, more than 90 different car brands were offering more than 470 different models. This is by far the widest choice offered to potential car buyers, compared to every mature auto market.

As the Chinese market is facing a relative slowdown in new car sales and the toughest competition ever seen, it is apparent that car manufacturers can no longer rely on market dynamism to develop sustainable sales. Increasing one’s own slice of the cake becomes critical to sustainability. It means that every car brand has to offer something different and unique to attract buyers.

The question is: How to stand out when each model has to compete with 469 others?

It’s time to innovate, with a deeper understanding of the complex needs and desires of car buyers. All brands need to be managed so that they are internally consistent and reflective of consumer needs. Three major dimensions have to be considered when it comes to uniqueness: the functional needs, the identity needs and the emotive needs.

• Functionality relates to the size of the car, the number of seats, the engine power, fuel economy, price, the carriage capacity, and other physical attributes.
• Identity relates to the identification of peer groups, the income level expressed by a car and the lifestyle image that the car projects.
• Emotional needs relate to feelings, such as adventure, power and caring, and to personal aspirations, such as ambition and individuality.

Most of the time, offering a clear answer to functional needs is pretty clear-cut and achievable.

Some brands on the market already have established their image based on this multi-layered structure of needs.

However, the majority of automotive players have not yet fully developed their reputation and image as far as car buyers are concerned. These brands are consequently exposed to price pressures. They do not provide reasons to pay more.

Of course, foreign car brands that enjoy a long heritage built in their home countries and their expansion abroad have clear advantages there. However, recent launches of new car brands in mature markets, such as Dacia in Western Europe or Latin America, demonstrate that it is still possible to build a differentiating positioning within a short period and to attract a significant number of new car buyers.

Developing a unique position is a first step: making it clear to potential new car buyers is another challenge.

In that respect, the key success factors lie in the consistency of the ‘messages’ the brands convey to consumers. Beyond traditional media, car drivers are exposed to multiple touch points, including visits to a dealer showroom or a motor show, Internet forums and word-of-mouth. All contribute to shaping a car’s image in people’s minds. The consistency of messages pushed across touch points is crucial to ensuring that the message received is unique, loud and clear.

Dismissing these fundamental dimensions or being late in implementing winning strategies will expose car brands to the high risk of disappearing from the Chinese El Dorado.

That won’t be good news for new car buyers.

Are low-cost car owners really committed to their brand?

asks Remy Pothet, Global Practice Head of TNS Automotive

With the increasing polarisation of the new car market, global market growth over the next decade will be driven mostly by the budget and premium car segments, leaving the mass volume OEM's to fight for market share in the middle.

OEM's are tapping into growth opportunities at both ends of the market.

In fast growing emerging markets, the rising number of new affluent consumers who aspire to exclusive and luxury models, is encouraging car manufacturers to develop their high-end product portfolio. At the current pace, the premium car segment could well reach up to 8% of the global car market by 2020.

At the other end of the spectrum, growth in the low-cost car segment is forecast to accelerate, reaching 20% of the global car market by 2020. This increasing demand for budget cars is fuelled by a combination of factors: the rise of middle-class consumers from BRIC and Central Europe with a limited budget (US$ 10k) for their new car purchase, the long-term market trend towards small, environmentally-friendly cars, and the rising demand in Western markets for basic, no-frills cars as consumers choose to divert their spending from automobiles to alternative categories that better reflect their priorities.

Innovation is at the heart of the budget car segment.

Low-cost cars are no longer synonymous with poor quality, obsolete technology or cheap imitations! Instead, traditional car manufacturers and newcomers from China and India are increasingly investing in highly innovative and cost-effective processes to develop sturdy and reliable models that meet consumers' specific functional needs.

Traditional OEMs under mounting pressure.

Dacia is a perfect illustration of the shift in the automotive industry. Initially designed to address consumer needs in emerging markets, the Dacia Logan by Renault achieved unexpected success among Western European consumers who rapidly adopted this cheap, yet robust model. This success story unsurprisingly prompted all of the big players in the car industry to follow in Renault's footsteps...

But are low-cost car owners really committed to their brand? I certainly think so, and so do car owners in France. Dacia recently astonished many car industry insiders by taking second place on the Car360 podium, in terms of brand performance as voted by vehicle owners, behind Audi and ahead of Mercedes. This illustrates that Dacia has indeed succeeded in attracting highly committed consumers who appreciate the brand for delivering on its promises at a very attractive price!

One thing is clear: traditional OEMs need to re-think their marketing strategies quickly and find innovative ways to reposition themselves in this increasingly dynamic market if they don't want to see their market share being squeezed further by the low-cost car phenomenon.....

Smart phones are the future of in-car “infotainment”

says Remy Pothet, Global Sector Head at TNS Automotive.

With more than 5 billion users on earth, mobile phone popularity exceeds that of cars (900 million). Almost every motorist is a mobile phone user and almost every new car buyer owns a smart phone! Consumer demand for compatibility is increasingly impacting the automotive industry.

Improving the customer’s driving experience

Mobile phones offer a great opportunity for car manufacturers to improve their competitive advantage. Firstly, they can help improve the customer’s driving experience. OEM’s should work closely with mobile phone manufacturers, telecom & IT providers and specialised digital agencies to develop interfaces to allow drivers to use new features in vehicles. Ford’s partnership with Microsoft to create Sync is a great example of this.

Smart phones are fast replacing expensive navigation systems as the same features are often available free. And numerous apps have been developed for drivers: locate your parked car, traffic conditions, tracking fuel costs, breakdown assistance, read emails aloud while you drive… or BMW Evolve which compares users’ driving habits to how BMW’s future electric vehicles would perform, which could help address consumer concerns about EV’s.   

Engage customers in on-going conversations

Secondly, smart phones open up an innovative channel for brand and dealer marketers to reach and engage customers in on-going conversations. Now is the time for switched-on marketers to use mobile to alert them of recalls, expiring warranties, send service reminders and advise them on future new car purchases. And of course new car buyers use their smart phone to research car purchases, especially in rapid growth markets where smart phones are the primary (if not the only) way of accessing the web.

Valuable customer feedback

Finally, mobile represents an exciting new way for manufacturers to collect feedback. Researchers analyse and interpret mobile feedback alongside existing customer data to present valuable insights which can be incorporated into the design of new vehicles.

It’s clear that mobile is influencing the automotive industry on many levels, and this is just the beginning.

Check out the world’s largest study into today’s global mobile consumer: www.discovermobilelife.com 

Could China reinvent the global automotive industry model in the next 20 years?

asks Rémy Pothet, Global Sector Head at TNS Automotive.

China has successfully established itself as leading producer and buyer in the automotive market worldwide, transforming the automotive leader board in less than 20 years. But this is just the beginning!

China’s automotive industry is still in its infancy

The rate of car ownership in China is less than 25 cars per 1000 inhabitants, compared to 500-600 in mature markets! 18 million vehicles sold in 2010 of which 70% were first time buyers! There is still huge potential for further growth as those living in lower tiered cities all aspire to buying a car as soon as possible.

Local players haven’t yet “gone global”

It is incredible to think that China is already market leader globally although its domestic manufacturers haven’t yet broken into other continents. Of course, there are joint ventures which are getting stronger and stronger (the likes of SAIC, FAW or SAW (Dong Feng) or ambitious 100% Chinese companies like Geely, BYD, or Chery) but none of them have become world players - yet. It’s only a matter of time, and then the world will be their oyster! But for now the Chinese automotive industry remains very fragmented and dependent on “foreign” companies.

So what’s in store in the next 20 years?

Could China reinvent the global automotive industry model? My opinion? I would say that China will be forced to do so if it wants to truly lead the global automotive industry, continue to develop its economy and meet such exceptional domestic demand potential!

Challenges such as the rise in fuel prices, congestion in major cities and increasing awareness of pollution will add extra pressure to reinvent the model and leave China with no choice but to take the lead in development of clean alternative fuel vehicles.

The industry has changed rapidly in the last 20 years, but this is a drop in the ocean compared to the changes ahead for the next 20!

Watch this space for further consolidation, Chinese players going global, vehicles bought online, new innovative driving experiences - and much more…

Vehicle manufacturers can’t bury their heads in the sand and ignore the digital revolution

says Rémy Pothet, Global Sector Head at TNS Automotive.

No-one can deny that the rise of digital is transforming society. The automotive industry is no exception. The internet is already consumers’ preferred method of finding information and preparing new car purchases in most countries. And a growing number of consumers are even buying new cars online.

Online interaction influences buying decisions

Complete strangers interact online about their vehicle experiences and plans to purchase via blogs, forums and social networks. And what’s more, these experiences strongly impact buying decisions as they are often considered to be a more trusted neutral source than automotive brands!.

Living rooms v. showrooms

Gone are the days of consumers visiting numerous showrooms and test-driving several models. When buyers go to a showroom these days many have already decided which vehicle to buy! Purchase decisions are increasingly made in the living room, not the showroom! Therefore the purpose of the showroom visit has changed considerably and scope for influencing buyers who have made up their minds is very limited. They are only interested in getting a feel for the cars’ dimensions, checking out how comfortable it is and taking a test drive. And the number of brands considered by new car buyers before making their decision is increasing as potential buyers are exposed to more brands online. Finally, the average time spent deciding which new vehicle to purchase has shortened due to the ease of access to information online..

Ignore the digital revolution at your peril

All of these observations make one thing clear: vehicle manufacturers can’t bury their heads in the sand and ignore the digital revolution. They need to seriously reconsider their marketing strategies. They need to get to grips with the scale of the impact on stakeholder relations by listening to consumers online and identifying within the new digital landscape the best touch-points and stages to influence consumers in their buying decision. We don’t have all the answers – yet. But it’s official: digital is turning the traditional vehicle path to purchase on its head.