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When cars are’t luxury anymore

Nowadays, do most Chinese consumers think cars are luxuries? Not anymore. In terms of price and penetration, cars are no longer luxury items. After several market blowouts, everything changes when cars become more common.

Do you have to buy cars at 4S stores? When the Anti-Monopoly Law is strictly enforced, the “franchise” operation may not work anymore. 4S stores are not the only place to purchase cars. When consumers know which brand they want to purchase and are able to enjoy factory warranties, it really doesn’t matter where they make a purchase. Purchasing online may even become the mainstream.

This doesn’t mean, however, that 4S stores are going out of business. They are facing major changes and challenges. One is their functionality. They may function as owners clubs or modification shops. Customers could buy a base car online and go to modification shops for customization. In other words, 4S stores would become a “luxury packaging” shop when cars aren’t luxury anymore.

Do people go to 4S stores for maintenance and service? We find in our research that large service companies are emerging in cities like Qingdao and Jilin. They seem to be capable of competing with 4S stores. When the Anti-Monopoly Law is enforced, OEMs no longer can control the sale of genuine OEM parts. Nor can they monopolize maintenance and service technologies. This will create market opportunities for third-party service providers. Consumers now order headlights and bumpers online. Although these may not be genuine OEM parts, they are quality products. At a recent international auto parts and components show in Chengdu, service parts providers expressed strong interests in the new market opportunities. Some of them are even shifting focus from exports to domestic sales. Their conclusion: “With consumer acceptance, the aftermarket provides unlimited potentials for them.”

When cars aren’t luxury anymore, consumers face more choices. Cars become normal consumer goods, with less expensive but quality maintenance cost. They can get specialized tools and fix small problems themselves. Facing growing competition, the focus of 4S stores should be quality. They have the advantage of OEM resources. As long as they can ensure quality service with knowledgeable mechanics, they should not worry about customers. By maintaining quality standards and value-added service, they will attract clients.

There are three kinds of customers: those who sacrifice quality for price, those seeking a reasonable ratio between the two and those who emphasize quality over price. When cars aren’t luxury anymore, the second group of customers will increase dramatically, and the number of first and third group will decrease.

When cars are not luxury anymore, the main purpose of having cars would be for commuting. The number of trendy consumers who purchase luxury, high-end and sports cars will decline and those who purchase cars for practical reasons will increase. Economy and inexpensive cars will become popular and two-box cars may become consumers’ first choice. SUVs and MPVs will have stable clients as they meet personalized needs.

There will be more and more changes to come, especially when cars become available and affordable. Some changes could be obvious and some will be not. Will China’s auto market follow the path of Europe? Or will they take a unique and different one? Only time will tell.

(Rewritten by Yewei Liu based on author’s article on auto.sina.com.cn)

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