China is the largest automotive market and luxury cars accounted for 10.3% share of the country’s overall passenger vehicle market in 2017. Frost & Sullivan’s recent report, China Luxury Car Market, Forecast to 2025, forecast China’s luxury car market to experience a positive growth at a compound annual growth rate (CAGR) of 5.4% during 2017-2025. Consequently, market players must pay close attention to a couple of emerging customer demographics, as they are likely to continue drive the demand for luxury cars in China.
Female Empowerment to shift the market gender dominance
Higher education levels, improved job opportunities, and increased urbanization led to better living standards for women in China. Therefore, social improvement generated higher demand for luxury cars among female customer to meet their basic transportation needs as well as satisfy their status quo.
Frost & Sullivan found that women, especially those in tier I cities, are likely to spend as much as men on mobility. It cannot be ignored that the female market segment is transforming the mobility market dynamics and is likely to create greater business opportunity. Moreover, Frost & Sullivan’s recent study also reported that BMW is highly favoured among female drivers in China, with an adoption rate of 47% in 2017. Female buyers whom prefer BMW vehicles are mainly have successful careers and seek aggressive car designs with brand positioning to represent their positive attitude towards life.
Rise of the Millennial and Generation Z as main luxury car market consumers
168 million Chinese born in the 1990s and 2000s, which account for 12.1% of the country’s population, will be the next main consumers in the luxury car market pursuing vehicles of premium status. China’s Millennials and Gen Z population are mostly the only child in their families and raised in a relatively better environment compared to the elder generations.
On top of that, the parents of these generations are likely to make higher impulse purchases, thanks to accelerated economic growth over the past 10-15 years and increased disposable incomes. Having benefitted from such abundance of resources, their children are largely immune to cost considerations and also less cost sensitive when making luxury purchase decisions.
All in all, China’s luxury car market observes positive growth mainly due to demand from female customers and prospecs from Millennials and Gen Z. Mercedes-Benz, Audi and BMW were among the top three players in the market in 2017 and the trend is looking positive for most market players.
Learn more on Frost & Sullivan’s report on China Luxury Car Market, Forecast to 2025.
Subarna Poudel is a researcher with Frost & Sullivan. He can be reached at email@example.com