50 Factors Affecting Chinese automobile market According to international convention, when a nation’s average GDP per head stands at US$ 1, 000 – 10, 000, it represents a golden age for the nation’s automobile industry. By 2001, China’s GDP per capita is estimated to exceed US$ 1, 000. However, the automobile industry remains bedeviled by sluggish growth. Why? GDP growth rate affects the automobile market. Every one percent of GDP growth enlarges the automobile market by 1-2 percent. GDP increase or decrease has a critical influence on the development of the automobile market.
Foreign exchange reserve and export allow China to pay for its petrol, raw materials and components. China has discovered large oilfields in coastal and inland areas. These must cover the increasing demands of the automobile market. China boasts 1. 3 million kilometers of road and 14 million vehicles. That means average road per vehicle is 90 meters.
However, there are also 200 million bicycles, 30 million motorcycles, 15 million agriculture vehicles, 13 million tractors and 10 million horse-drawn carts. More road construction is imminent. If China completes a highway network radiating in all directions, people will alter their means of transportation. Recent tax reforms have increased incomes, strengthening the purchasing power of government organizations and work units. The booming economy will spur enterprise prosperity.
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Consequently, the number of automobiles will increase. Enterprises do not own many automobiles. The business vehicle market has potential. With the increasing living conditions of the Chinese people, their demands to lease automobiles will also increase.
Leasing accounts will keep developing. Along with the expanding national economy, more raw materials and parts will be made in China, reducing costs and sales prices of the automobile. The development of the individual economy will bring out more individual automobile purchases. The central areas of China, including Hubei, Chongqing, Henan, Shanxi, are the largest automobile markets. Highly – developed small cities have less traffic jams. The rate of automobile per capita will be higher there than in the clogged big cities.
Automobile makers are watching this. According to the economic convention, GDP per capita has a functional relationship with the number of automobiles owned per thousand people, and directly affects the scale of the market. Compared to other nations of the same GDP per capita as China, China! s number of automobiles owned per thousand peoples is lower. China has the potential. However, automobile policies tend to restrict that potential.
Automobile Management Regulations will be enacted in 2001, which standardized auto production, sales, purchase and scarp. The cancellation of compulsory scrapping regulations will have a positive effect on the family automobile market. Fuel tax will be replaced by road tolls. Taxis, public and business vehicle owners will pay one to four times more through the toll system, restraining market growth. But family automobiles will enjoy a comparative advantage.
There will thus be more individual automobile purchases. A new automobile distribution system for government officials will stimulate sales of luxury automobiles like Shanghai Buick and Red Flag. It will reduce the number of economy, reduced-exhaust automobiles. Accession to WTO will urge domestic automobile makers to improve management, enhance quality and productivity, speed up technical progress, and make the best use of domestically resources. China has star det car credit. But as no property certificate goes with an automobile, the loans do not work well.
The younger generation are also leading the market for multifunctional, low cost furniture, such as DIY kitchens and bathrooms; this is due to the culture of the Chinese families with the kitchen and bathroom being the most personal area in their homes. (Allience, 2007) A major competitor and threat to the DIY businesses already established in China are the growing number of smaller contractors, ...
Second, as with the whole society, banks don! t have an effective credit evaluation system for their customers, resulting in a complicated procedure fore purchasing automobiles. Third, Chinese people haven! t got used to the idea of indebtedness. Customer credit can! t produce instant results. Nevertheless, as all these glitches are addressed, more people will try to pay for automobiles by installment. The neglect of public transport will encourage people to purchase other vehicles. Road and bridge tolls hurt the automobile market.
With Road Amendment Regulations pending, future reforms of road or bridge construction will promote the market. Business automobile market reforms including regulation of chauffeurs, requiring vehicles be fixed in designation repair shops and restricted petrol allowances will slow growth. The cancellation of certain automobile allowances for cadres will not stimulate the individual automobile market. Local protection policies will break up the automobile market, and tend to protect backwardness. Contradictions among the local governments and among the enterprises will become strained. Local protectionism is lately intensifying.
The construction of new roads and reconstruction of satellite cities will greatly influence purchasing by urban residents, taxi drivers, government and enterprises. Cracking down on the smuggling of automobiles and illegally assembled automobiles will guarantee the lion! s share of the Chinese automobile market to the domestic automobile industry. Stopping random fees on automobile purchase and use will dispel consumer concerns about the unlimited expenditures related to automobile ownership. Increasing numbers of laid “C off and unemployed and an unsound labor insurance system make people! s sense of security decline. People would rather save their money. Consumption and demand develop slowly in China.
Control of the automobile market results from two factors: city governments cannot improve road construction, but must also guarantee the speed off their officials automobiles. Regulation of automobile exhausts increases the price of automobiles. Although the price of the domestic automobile is cheaper, technology lags behind foreign automobiles, especially safety. In bid cities like Beijing, Shanghai and Guangzhou, the number of taxis is reaching saturation point, while small cities, especially in West China, are still hungry. As average income is not very high, the taxi market is mainly dominated by low-grade cars. However, with the improving standards of living, the grade of taxi will also improve.
Central Issue With the small car market in France undergoing rapid change, the strategies of yore are making way for newer methodologies. No longer can a car manufacturer simply make a big car for the wealthy and a small car for the less fortunate. For Ford, it is critical that they determine their target market for a new addition to their lineup, the Ka. But first, Ford needs to determine who ...
In the purchasing priorities of most Chinese people, a car comes behind a house. The cost of a house is so exorbitant, most families cannot afford it. Thus, their car purchases are also postponed. The improvement of secondary car policy will change people! s ideas.
Low-income groups may consider buying a second-hand car, and “rich” people can enjoy limousines if they want. The local traffic situation plays an important role in the development of the local automobile market. The limits on expressway use of small cars will effect sales of some types of car. The construction of parking lots cannot be ignored.
Sparse parking lots and high charges definitely squeeze the local automobile market. The amazing high tax on imported cars still exists, which stops the healthy growth of China! s automobile market. Defying the international regulations, all the imported vehicles in China are charged 10 percent of its price as taxation, and there is no preferential policy for business cars. However, the bulk of the money goes toward traffic management rather than road construction. If charges for traffic management and other extra fees continue unchecked, the development of the automobile industry and transportation will not gain momentum. If the RMB devalues, the price of import cars will increase.
That assists domestic automobiles in occupying the native market, as well as boosting exports. People still await a coherent and transparent automobile taxation system. Japan develops its automobile industry by constantly renewing its mini-car market. As a developing country, China is bothered by the overloaded population and poor road conditions. The enlargement of the mini-car market will stimulate the whole automobile market, even the national economy. State and local governments are still fare from realizing the automobile market boom will bring more opportunities.
Health care is a basic human right. The idea that healthy young people shouldn't have to pay as much for insurance is rooted in the notion that people should pay the cost of treatment when they get sick or old or injured. Insurance is just a way of separating people into groups of similar risk; it's still basically charging people the cost of treating their ailments. We're all in this world ...
In developed countries, one seventh of the population earns their living in the automobile sector. Competition among local automobile manufactures drives down prices. This drives the market, but not decisively. The quality of local cars improves.
Technology should be improved, but not all technology fits national conditions. Local manufactures should foster self-help, designing products with parts they can produce by themselves and localizing products from the very beginning. Production should relate to customer orders. Delivery should never be delayed. Self-policy and strategy need to be thought out by manufactures.
Advertising plays an important role in improving corporate image. Branding is the key to boosting sales. Chinese people have the habit of hiding their wealth. In developing countries, owning a car is the ultimate status symbol. Most private cars belong to the rich. Buying a car is an announcement of affluence.
Rich people themselves are waiting for the car to become as popular as TV or refrigerator. Owning a car is especially popular among young men in their 20 s and 30 s. In a few years, these people will grasp any chance. Mini and economy cars will one day dominate the automobile market.
Government regulations and competition among taxi drive down fares. Some people prefer a taxi ride to driving their own car. Chinese people are accustomed to spending time to save money, instead of spending money to save time. As the economy develops, the rhythm of life will speed up. The car will finally replace the bicycle.