The car market
China's passenger car market is expected to grow from 740,000 units in 2001 to 1.3 million units by 2005. This growth will be supported by the growing middle class and by the opening of the Chinese market that is expected to take place following China's joining the WTO. In addition, China is slowly transitioning from a limited institutional vehicle market to a potentially vast consumer-driven market. Some forecasts predict that China's market could be as large as Japan's by 2010 and as big as the U.S. market by 2025.(MESSINA,2004)
A) ENVIRONMENTAL ASPECT
China has become today one of the most privileged car markets in the world. Over the last ten years, the market growth has reached around 15% and the amount of cars in China has amazingly increased, from 1 million vehicles in 1978, to 20 million in 2001.
The amount of number plates registered in 2002 was 2.6 million (+ 31, 4% compared to 2001).
Now that China has entered the World Trade Organisation, and is organising a possible tax free trade market with the ASEAN, the commercial potential of the country is estimated around 20 million cars extra until 2008. Moreover, custom taxes will be reduced (from 80% in 2001 to 25% in 2006), import quantity restrictions will be totally banned in 2006, and finally, car distribution and loans will be more efficient and frequently used in 2 to 4 years time.
The country has around 100 different car constructors, which involves a very decentralized market a lots of production sites. The national production is very much turned towards utility vehicles, such as buses, lorries, also recently the private vehicle has been very successful.
On this market, which is dominated by high class cars, the state is the most important client: 40 % of the high class car market is sold to the state; Then comes the private companies, with 30 % ,and far behind, with 10%, comes the private car holders.
Since 2001, the Chinese government has decided to make of the car industry one of the most important industries of the country, in order to increase the amount of private car holders; as a matter of fact, there is now days only 1 car for 100 people in China.
Moreover, smaller cars, not considered as high class cars, are already very popular for younger customers, because of their price and the success of “tuning” on the European and American continents.
In 2010, private car holders in China will definitely be the first customers on the market. (BOOTH E,1998)
B) OFFER (INFLUENCE)
Ten years ago, having a car was the dream of every Chinese man, but now days, this dream has become true in lots of big and medium size towns of China.
Beijing for example, is a very big town in China, where one tens of the people living there have a car. The Chinese population is very involved in the car market, which is therefore making it one of the most important markets today.
People are starting to realize how useful a car can be, in a day to day life, with ones family or for work. Vehicles are also much cheaper than a few years ago, and can be considered as a real investment for workers for example. Mentalities therefore are changing, and instead of realizing how useful a car can be, people now start thinking how difficult it is to live without a car.
China is basically living what Europe and America have lived 15 to 20 years ago.
One muss not forget that the car market only started developing itself in the 1950’s.
In the middle of the 90’s, when the demand seriously increased, China then really started developing the car industry, as much as the cooperation with foreign companies. Different kinds of cars then entered the Chinese market.
Considering the “car industry association” data, in 1985, China only had 3.2 million cars on its market. At that time, on one hand, living means and salaries were still very low, and people did not have enough money to be able to place some; On the other hand, the car industry was not developed at all, therefore their was not much of a choice for the customer.
In 2001, this amount of 3.2 million reached 18 million cars. The amount of private car holders is definitely climbing. As more and more people are wanting to buy, the Chinese car production is now days forced to reconsider and increase his production volume.
The growth of private car holders in China is due first of all to the growth of personal salaries. It is also due to the conditions created to generally increase the use of cars by the population. For example, the amount of petrol stations in the whole country is always growing, taxes on the car consumption have been banned.
The high range construction of motorways and roads all over the country, as much as the desire of having a better quality life style, have been extremely important assets to the rapidity of the car industry’s growth.
The life style of the Chinese population is very much changing. As we can imagine, people are now travelling all around the country, much more than before. At the end the week, people now tend to leave the city and go in the mountains or in the country side… Chinese people can now go on holiday, out for the weekend and have the fresh air. In the summer, people go to the beach, and in the winter, people go skiing… All these things that seem so normal to us are for the Chinese a totally new experience.
As explained above, there is now a important amount of cars in big cities, which is a sign of wealth and development. But unfortunately, this increasing amount of cars is also creating traffic jams, accidents etc. People are therefore also starting to see the bad points of having a car, such as being blocked for hours on end in traffic jams and arriving terribly late in the office… In a town like Beijing, there is already a fifth a sixth circular road around the city, in order to prevent as much as possible traffic problems.
When we have a look at what is coming up at the end of this year, the whole car production in China should normally reach 3.9 million units, around 20% more than the year 2002.
This constant growth is due to the long-term economical growth of the country, to the organization and better control of the car industry’s environment, and to the strong competition going on in this market. Every year, the country is increasing the production and investment in the car market.
YAO, general secretary of the “China car production Association”, explains that most regions in China are considering the car industry as the industry number one in the country. Yao also explains that the price of the cars is not going to decrease yet, and that the competition is therefore going to calm down.
As the custom taxes are also being reduced, the price of cars brought in to the country will also be reduced; national companies will then have to reconsider their strategy, by researching new products and reducing prices on old ones.
China should also reinforce her second hand car market in order to help the Chinese population to have financial access to a vehicle.
C) COMPETITION
Sales of built in grew 39 percent in the first six months of 2002 to 492,430 units. The was the best-selling model for the period; capturing 12% percent market share -turning growth in is drawing a crowd.
China's market grew at a clip of 31 percent through the first five months of 2002. Sales for the year are on track to reach a record 900,000 units. This makes the fastest growing car market on earth.
Competitors from , the USA, and today are scratching and elbowing for a share of a market that, only a few years ago, was dominated by . The German automaker, operating two joint ventures in , consistently took 60 percent market share during the 1990s.
But 's entry into the WTO has flung open the doors to competition. Gone are the days of cozy, managed competition.
Strongest among today's challengers is , which has grabbed 10 percent market share since entering in 1998. GM's joint venture in () produces the , the 8 minivan and the , a -sourced modified for the market. Buick sales are projected to be 90,000 units in 2002, up from 52,000 cars and minivans in 2001.
Ford, for its part, is moving to make up lost ground. At a new joint venture in city of , is building a green field factory to produce the , a based on the platform. Initial designed capacity is 50,000 units, with the option to expand to 150,000 in the future. Ford, which concluded unsuccessful negotiations for two separate joint ventures in the 1990s, expects the new venture, , to produce 30,000 in 2003.
DaimlerChrysler hopes to reverse the misfortunes , the US-Chinese joint venture founded in 1985. Years of acrimony between the Americans and Chinese have soured the atmosphere at the plant, where production is at its lowest levels since 1987. Sales through May have limped to 1,102 units. Further aggravating the sales slump is a Chinese perception that are work vehicles to be driven by farmers and construction workers. To appeal to a younger crowd of urban professionals, in 2003 will add production of the .
Mercedes , in contrast, have been strong. Imports of , 80 percent of which are S- priced at more than $120,000 after taxes, will top 5,000 units in 2002.
Market leader, , is wasting no time or resources to defend its position. Since 2000 (and its sister company ) have introduced their very latest VW products to the market, including the , 6, , and . VW joint ventures also continue to sell the older model and , which appeal to more frugal Chinese.
There are an estimated 2.4 million on the , thanks to the long presence in dating back to 1984. Despite the hard-charging competition, VW still accounts four of ten new car sales in in 2002.
While may be most visible rival to VW, even greater threats come from the Japanese carmakers, which are making quiet but certain inroads into the Chinese market. Honda, which started full production in only in 2000, will sell 60,000 and minivans this year out of its joint venture in the southern city of . Customers wait 1 to 3 months for delivery.
In October, will begin production of the T-1, a car based on the , which is come equipped with navigation equipment (a first in ). Chinese consumers like the attention to detail of Japanese car interiors and the money-saving engines that are so stingy on fuel.(EXUM,2004)
All together Japanese makes capture 28 percent of 's car market today. If Japanese performance in other markets is any indicator, that share will only rise in the years to come.
Competition for the market does not end with coverage of the global automakers. Shocking the industry, two privately owned Chinese companies have launched products that in less than 24 months have stolen 10 percent of the market. The , a Chinese model built from an older SEAT production line shipped over from and the , a knock-off, will combine for sales of 90,000 units in 2002. These companies were virtually unknown just three years ago.
Cheaper cars made by Chinese factories, adding to the already mounting competition, have forced every automaker to reduce prices in 2002, some by as much as 25 percent.Ominously, the product is built by a joint venture between the government of province and the (SAIC). SAIC is joint venture partners with both VW and GM.To the chagrin of global carmakers, competition in 's car industry will be ever more ruthless in the days to come. (DUNNE, 2002)
D) GOVERNMENT POLICIES
The Chinese government has encouraged the private ownership of cars in its most recent Five Year Plan. As a means to that end, the Chinese government is instituting several measures. The Chinese government is formulating a soon-to-be-released policy that will make it easier for consumers to purchase vehicles. In general, four aspects will be covered: a unified tax system based on a unified fuel tax, development of urban mass transportation systems, facilitation of financing, and the establishment of a consumption tax based on engine displacement to encourage fuel efficiency. In addition, some provinces, municipalities and autonomous regions have also abolished some local charges on motor vehicles. For automotive parts, the major government policy that guided private and international companies through 2000 was the 1996 Auto Industry Policy, which stated that car manufacturers must initially procure 40 percent of parts locally and then increase the localization of parts to 60 or 80 percent within a specified time frame. (CHAN,1996)
WTO Auto Agreement Overview
Tariffs
· Tariffs on autos, reduced on January 1, 2001 to between 70 and 80 percent, will gradually decrease to 25 percent by the end of 2006. Tariffs on automotive parts, reduced on January 1, 2001 to an average of 23.45 percent, will gradually decrease to an average of 10 percent.
Quotas
· Quotas on autos will be phased out by 2005 with an initial level of $6.0 billion. Quotas will grow 15% annually until eliminated.
Distribution and Trading Rights
· Currently in China, the right to engage in trade (importing and exporting) is strictly limited; only companies that receive specific authorization or who import goods to be used in production have such rights. This limits the ability of U.S. companies to do business in China, and has limited U.S. exports. China has agreed that companies in China and U.S. companies will be able distribute most products, including autos and auto parts, into any part of China three years after accession. This commitment is phased in over the three-year period.
· China also generally prohibits companies from distributing imported products or providing related distribution services such as repair and maintenance services. China will permit foreign enterprises to engage in the full range of distribution services over a three-year phase-in period for almost all products, including autos and auto parts.
Auto Financing
· Currently, only certain Chinese banks are authorized to conduct auto financing and only for certain vehicle models. Upon accession, non-bank financial institutions will be permitted to provide auto financing without any market access or national treatment limitations.
Local Content
· China has agreed to eliminate local content requirements immediately after it accedes to the WTO and not to enforce provisions in existing contracts that impose this requirement. Current local content requirements on vehicle manufacturers range from 40 to 80 percent.
· These commitments combined with the other market-opening steps that China will take, such as cutting tariffs, eliminating quotas and permitting our companies to distribute products in China, will result in better access for our automotive exports and eliminate false incentives or requirements to use domestic goods.
Technology Transfer
· China has agreed that it will not condition import or investment approvals on technology transfer or on conducting research and development in China.
· China will also have to provide better intellectual property protection for technology that is transferred and eliminate requirements mandating that the Chinese partner in a joint venture gains ownership of trade secrets after a certain number of years.
Offsets
· China has agreed that importation and investment will not be conditioned on providing offsets.
Other Commitments
· To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.
· China has agreed not to apply or enforce export-performance requirements and similar requirements as a condition on importation or investment approval. This would ensure that products from any U.S. manufacturing facilities in China would not be encouraged to compete with U.S.-made autos and auto parts in other markets, including the U.S.
Post WTO Implementation
China has begun to honor its WTO commitments. On January 1, 2002, the tariff for cars below 3L was lowered from 70 percent to 43.8 percent and for cars above 3L, from 80 percent to 50.7 percent. It was the biggest cut after the country's entry into the WTO in December 2001. In addition to lowering tariffs, China will grant a total auto import quota of US$8 billion this year.
As predicted, the tariff decrease led to the price of imported vehicles declining by 15 per cent. In order to stay competitive, local manufacturers, such as Shanghai General Motors, Shanghai Volkswagen, Tianjin Automotive Industry Group, Dongfeng Citroen and First Automotive Works (FAW), cut prices. For example, Shanghai General Motors reduced the price of its 2.5-litre Buick sedan by 30,000 yuan (US$3,610). China's biggest automotive group, FAW, has cut car prices by an average of 30,000 yuan. Tianjin Automobile Industry Corp. (TAIC) cut Xiali economy car prices by 20 percent. The company's daily sales were nine times higher than usual.
The price cuts encouraged consumers who had waited for a price cut, to purchase. Fearing a loss in market shares, a number of domestic auto makers followed by cutting car prices. Additional price cuts may be expected this year as all China's car-makers want a higher share of the market before foreign car-makers move in with newer models and build up their own sales.
Average reductions in the CBU imported sector amount to 100,000-130,000 yuan. Vehicles that went through customs clearance under the new reduced tariffs began selling on January 25th. Imported vehicle dealers in metropolitan areas such as Guangzhou have quickly lower prices to reflect the lower tariffs. Recent initiatives include 16% off the price of an imported Nissan Cefiro and a 14% off the price of an imported Toyota Camry.
Automakers and major suppliers anticipate 7-10% annual growth in passenger vehicle demand in China but latest surveys suggest that much of this growth will be fueled by imports. The country imported 72,000 vehicles last year, up from 42,000 in 2000, according to statistics from the China Trading Center for Automobile Imports. China imported 29,000 Japanese vehicles last year, compared with 17,000 units from Germany. Japanese vehicles would grow to be half of the total imports this year as a result of China's removal of a 100 per cent punitive tariff in an effort to end a trade disagreement with Japan. China imposed the punitive duty on Japanese vehicles as part of its countermeasures against Japan's emergency tariff on mushrooms, leeks and tatami rushes imported from China.
The Chinese auto industry is confident that 2002 will produce solid demand growth. According to the most optimistic projections, combined sedan/MPV/SUV sales this year could reach 900,000 units, up nearly 18% on the 2001 result of 740,000 units, with imported car sales passing 80,000 units, an annualized increased of 80%. Sales of high-end luxury cars jumped 65% in 2001 and should increase again as local producers step up output and a wider choice of imports becomes available.
In the more distant future, there is less market certainty because it is unclear the extent that China will follow its WTO commitments. The optimistic outlooks presumes that China will allow a fully fledged free market in which importers can compete on a near-level playing field with domestic producers. But, such a scenario is unlikely. Most agree that Beijing will comply narrowly with WTO norms by reducing import tariffs but if local automakers are seriously threatened, non-tariff barriers may be implemented.
Smaller and weaker local assemblers face an uncertain future and auto production in China is sure to be consolidate among fewer, bigger producers. Increased competition is expected to speed up the introduction of such models, which will further the consolidation trend already under way in the Chinese automotive industry. China's WTO entry will force local automakers to reduce costs, improve quality and achieve economies of scale in order to survive. Similarly, with the lowering of tariffs, imports should increase and more effectively compete with locally produced models. Manufacturers will be able to source components on a world-wide basis from suppliers which have higher quality and cheaper products. Many of China's auto makers and suppliers are inefficient, produce poor quality products, and are not likely to survive in an open market
There are positive indicators. The financing sector is opening up to foreign firms, allowing affordable finance packages for first-time buyers. In addition to less expensive cars, credit is more available to Chinese consumers. Since the Chinese auto credit market is opening up to non-banking foreign institutions in line with the country's WTO commitments, the Chinese consumer will be able to get more varied and convenient credit services. GM announced plans for a joint venture to provide auto financing once the People's Bank of China issues regulations governing the industry. In 2001, the Shanghai Branch of China's Industrial and Commercial Bank alone granted loans worth 2.16 billion Yuan (about 253 million U.S. dollars) to help local people purchase 18,000 automobiles.
Highway construction continues. The country's traffic conditions have undergone a gigantic improvement which has greatly enhanced people's interest in auto purchases. Last year, China spent over 100 billion yuan (around 12 billion U.S. dollars) to improve road construction and traffic management in 729 cities. The average driving speed of automobiles in 35 metropolises has risen to 29.3 kilometer per hour. China already has 1.4 million kilometers of paved roads of which 16,000km is expressway, the third highest figure worldwide. (,)
WTO Compliance
The newly elected president of the American Chamber of Commerce in China, Christian Murck, said that the business community would not rush to judgement of the overall success of China's implementation of WTO commitments, nor would companies rush to use the WTO's dispute settlement mechanism as problems arise. Rather, Murck described an extensive private-sector monitoring strategy for China's compliance and outlined an industry policy based predominantly on long term developments.
Murck thought that an accurate assessment of China's compliance would take several years. Furthermore, according to Murck, the business community is not expecting a uniform picture on China compliance, and anticipates setbacks.
E) PERSPECTIVES
With the entry into the World Trade Organisation (WTO), the average tariff rate on automobile parts will be cut from the present 25 per cent to 10 percent. The quota control will be abolished this year, the import license will be revoked by 2005, and the tariff rate on import of auto parts will be cut to 10 percent by July 1, 2006.
Quotas issue for automobile products including parts and components will increase step by step to full opening, and the graded tariff policy for supporting localization will also be abolished to bring down the localization rate of auto parts and components from the current 80 percent to 40-50 percent, while complete vehicle plants will turn to global purchase. At that time, China's automobile parts industry will be fully open to the outside world in terms of capital market, market, localization and international standards. There will be a major inflow of foreign capital and fierce competition in the sector. Many foreign auto parts manufacturers are planning to cut the prices of their products at an average annual rate of 10 per cent, and the prices and quality of domestic parts and components will be closer to that on the world market. The prices of parts and components manufactured in China will further decline, with an expected cut of about 30-60 percent in the next three years. Because of limited development capability and the low level of quality, the prices of imported parts and components may be even cheaper than those made in China.
Under these circumstances, Chinese auto parts production enterprises, which have been under the dual protection of tariff and localization rates, will face a strong challenge and fierce competition at the time. This will not include enterprises engaging in production of parts, which are not convenient for long-distance transportation. Enterprises, with shortage of funds, and with weak survival capability and quick market response, will be eliminated.
For a long time, China's car industry has been under the protection of the government in two ways, one, the high tariff rate, and the other, the control on import. The tariff rate for car import was 220% before 1986, and dropped to 150% in 1994, to 100% in 1996 and down to 80%in 1997. The current average tariff rate for motor vehicles is 38.8%. The highest tariff rate for key parts is 50%, and the average tariff rate for 65 complete vehicle projects was 56%, including 80-100% for cars, higher than for cigarette and alcohol. A Buick car sold at US$20,000 in the United States is sold at RMB370,000 in China, (equivalent to about US$40,000). The price for a Honda Accord car in Japan is US$18,000, but RMB298,000 in China (about US$36,000). By also covering the tariff rate of auto-related industries such as machinery, iron and steel, rubber and electronics that stand at 10-20%, the effective rate of protection for the automotive industry is as high as 219%.
Those whose prices are higher than the world market prices, such as cars, luxury buses and trucks, mainly feel the pressure from price reductions. The direct and the most effective means for foreign automobile manufacturers to enter a new market is to cut price and cost. Low price can win loyalty from customers and help enterprises achieve a bigger market share. Research proves that when domestically-made car prices are higher than imported ones, only 20-25% of the potential buyers prefer to buy locally made cars, when the price is equivalent or lower than the imported model, 40-47% prefer locally made cars, and when the price is less than 80% of the same model of imported cars, the percentage increases to 55.5-87%.So, to conclude, Chinese domestic automakers are forced to cut their prices too to meet the competition, although the Chinese people are very conservative and have strong nationalistic feelings.
The competition is always higher and higher and creates a diminution of the prices. That’s why now, the Chinese population seriously considers buying a car.(CHAU,1996)
F) OTHER ELEMENTS
A better road network
China boasts 1.3 million kilometres 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 agricultural 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. The construction of new roads and reconstruction of satellite cities will greatly influence purchasing by urban residents, taxi drivers, government and enterprises. Road and bridge tolls hurt the automobile market. With Road Amendment Regulations pending, future reforms of road or bridge construction will promote the market.
China is a huge country and they need to have an adapted road network to cover all of the country.The Chinese government is going to improve China’s roadnetwork.
More choice for Chinese consumers
After China became a member of the WTO, international automobile giants including General Motors, Ford, Daimler-Chrysler, Honda, Toyota, Nissan and BMW have one after another entered China, while foreign automobile parts and components companies are also battling to enter its market. So, the offer is bigger and Chinese people have more choice when they want to buy cars. They can appreciate the strengths of foreign car models. The opening up of China and the arrival of a myriad of foreign consumer product companies has generated an explosion in consumer choice. The average Chinese consumer is both excited and overwhelmed by his mounting purchasing options.
After sales service.
Bosch, the second largest auto parts producer in the world, has set up a large sales network covering the whole area of China with 153 after-sales service stations.
As our target is very demanding concerning the product, they are also demanding concerning the after sales network, that is to say, the maintenance, the car components, the car equipment, etc. The Chinese people are very demanding about the quality and the after-sale service.
III) CITROEN IN CHINA
A) THE HISTORY OB BUSINESS
1987 : Contacting between Citroën and SAW - The Motor Second Work - (become Dông Feng Motors), 2nd Chinese trucks producer
1988 : First offer of Citroën and tests of rolling in China. Feasibility study.
1989 : Approval of the project Citroën / SAW by the Chinese Authorities
1990 : Citroën and Dongfeng Company (formerly the Motor Second Work), signs a contract creating the Dongfeng Citroën Automobile Company company. ZX will be produced in China for the local market
1992 : The contract signed in 1990 by Citroën and Dông Feng Motors (1st Chinese builder of lorries), and creating the mixed Dông Feng Citroën Automobile Company ( DCAC ) joint-venture company established(constituted) between Motorcars Citroën and Dongfeng Motor Corporation, comes into effect.
1992-1995 : Construction of both production units to Wuhan and Xiang Fan, in Hubei.
1996 : At the beginning of the production of Fukang (prosperity and health) to Wuhan. The model was the first one to satisfy the standards anti-pollution current in Peking.
1998 : Launch of Fukang 988 tricorps specially developed for the Chinese market.
1999-2000 : In 2000, the production of the ZX Fukang in China reached 50.000 vehicles, mainly bought by institutional customers, administrations and public utilities, companies(societies) of taxis, car rental companies and private companies - In 2001, the market share of the ZX Fukang represent 9 % of the Chinese market.
2001 : DCAC account 8 regional offices and about 480 selling points distributed in all China. More than 230.000 Fukang was already sold.
B) INDUSTRIAL TOOLS IN CHINA
XIANG FAN facilities
The factory of Xiang Fan includes workshops of manufacturing and assembly for the production .The site shelters buildings of 88.000 m2 and employs directly 1.100 persons. Located to 400 km of Wuhan, in the northeast of Hubei, Xiang Fan counts approximately 700.000 inhabitants.
WUHAN facilities
The terminal factory of Wuhan is situated in Hubei, a region of 58 million inhabitants. Wuhan, city of 7 million inhabitants, is major of the south centre and the administrative centre of Hubei. This town, crossed by the river Yangtse, the longest river of China, possesses a very big commercial harbour. It is, furthermore, an important industrial area of the country. In the production of Fukang and Fukang tricorps added, that of Xsara Picasso (since October, 2001) .En 2001, 54.000 units were produced to Wuhan with a cadence about 260 vehicles a day. Today, approximately 420 vehicles are daily made. The factory was conceived for a total capacity of production of 150.000 vehicles a year, that is 622 a day. In October 2002, 2.600 persons worked on the site. Since September 1st, 2002, a second team of production was organized.
IV) THE PROJECT
A) TARGET
The Chinese market is dominated by traditional cars, which were formerly intended to government workers, for the Chinese companies and finished most of the time in the hands of the people that had enough money to finance such an acquisition, and could also be used as taxis in the cities.
With the development of China and the increase of the Chinese average wage, these modern cars are more accessible to the modest classes of the population. However, these products are available only for a limited proportion of Chinese consumer. It proves that this type of modern car is intended to the townsmen because the majority of Chinese in the country do not have enough resources to afford these products financially.
Our target is defined by some criteria related to socio-professional, demographic and geographical categories of the potential consumers, but also on quality criteria, describing their attitudes and behaviours.
- Heart of target: men and women having enters 22 and 55 years
- Categories of incomes middle and high (more 22.000 euro per years)
- Families and single people living downtown and in suburbs
- Intended to the individuals seeking a vehicle of quality
- People seeking a vehicle that answer criteria of safety
- For the families that have three children or less
- Everybody wanting a product coming from a trustful and confident brand.
With this kind of primary data, we will be able to define the potential consumer’s need, in order to help us build a campaign and some advertising that fits to the customer’s desire and will also target our audience.
B) POSITIONING
The C3 has a strong and original personality conveyed through expressive styling. Its roomy architecture makes it light, spacious, friendly and accessible. In the city and on the motorway, the C3 proves itself to be eminently versatile. The C3 offers a surprisingly large capacity for a vehicle in this segment, and the boot is exceptionally practical to use. Compact and easy to handle, the C3 is ideally suited to city living. With its equipment and wide range of engines, it offers a level of driving pleasure that is worthy of a full-size model. Through these characteristics, the C3 makes significant progress in compact vehicle design and should largely satisfy their concerns in terms of cost and environmental performance.
In a few words we can define it’s positioning as follows:
« Citroën C3 : a unique personality combining well-being with all round versatility »
C) COPY STRATEGY
The copy strategy summarises what the message has to communicate. The questions that we will ask ourselves to establish this strategy will be:
- What are the benefits for the consumers?
- What idea can be put ahead to support these benefits ?
- What tone has to have the message ?
1 - Positioning
The “C3” is the modern car whose quality and unique comfort makes its originality and its specificity.
2 – Proof
Driving the new C3 is very secure, and this vehicle is easy and comfortable to drive.
3 – Benefice
When I drive the C3, I feel I’m able to face everything that stands on my way.
4 – Support
The new C3 is easy to drive, a safe product of high quality which is made to be driven in the cities, as much as in the country side.
V) MARKETING MIX
We already sell a compact car entitled C3. This model was very successful, so we are confident in adapting our marketing mix to launch this car in China.
A) THE PRODUCT
The name
The product is well known and already has good international awareness. That’s why we have chosen to keep the name C3 but we are going to adapt our message as the letter C represents many things: China, Compact, Car, and of course Citroen.
Body Style/design
Designed by Citroen’s Styling Centre, the C3 has a strong and original personality conveyed through expressive and generous styling. Its roomy architecture makes it light, spacious, friendly and accessible. In the city and on the motorway, the C3 proves itself to be eminently versatile. The new architectural design is reflected in the external width (1.67 m) and height (1.52 m), which are exceptional for a vehicle of this length (3.85 m). These proportions make the C3 exceptionally roomy for a vehicle of compact design.
Comfort
A car of many talents, a highly practical vehicle, the C3 optimises the interior volume available for both the passengers and their luggage. Offering a surprisingly large capacity for a vehicle in this segment, the boot is exceptionally practical to use, thanks to the Moduboard, created by Citroën to make boot organisation easier. The bright, pleasant interior is enhanced by an exceptionally large electrically controlled glass sunroof, which extends back over the rear seats.
Equipment
Compact and easy to handle (with continuously variable electric power steering), the C3 is ideally suited to city living. With its equipment and wide range of engines, the C3 offers a level of driving pleasure that is worthy of a full-size tourer. Through these characteristics, the C3 makes significant progress in compact vehicle design. It is able to adapt to the requirements of different customers, while also satisfying their concerns in terms of cost and environmental performance.
Engine
Heralding the new generation of direct-injection diesel engines developed through the cooperation agreement between PSA Peugeot Citroën and Ford, the 1.4 HDi and 1.4 HDi 16V engines make a strong contribution to driving pleasure on board the C3. At launch, the range will be structured around four levels of trim and five engines. For the diesel version, the two new-generation direct-injection engines will be available: the 1.4 HDi 50 kW (70 bhp DIN) and the 1.4 HDi 16V 66 kW (92 bhp DIN). For the petrol version, three engines will be available: the 1.1i 44 kW (61 bhp DIN), the 1.4i 55 kW (75 bhp DIN) and the 1.6i 16V 80 kW (110 bhp DIN). A sequentially controlled auto-active automatic gearbox is available for the 1.4i engine.
Safety
Customers demand high standards of safety, and rightly so. To meet this need, the C3 offers top-level active and passive safety features. The C3 offers particularly surefooted roadholding. The braking system features ABS, electronic brake force distribution and emergency braking assistance. With its wide-range of safety equipment (including six airbags of which two are curtain, and child safety locks controlled by an electric button on the dashboard), the C3 is a class-beater in advanced safety features. In addition, the C3 features multiplex electrics of the same type as those of the Citroen C5. As a result, it can boast a wide range of «intelligent» comfort and safety equipment. Electronic parking assistance, automatic front windscreen wipers, a black panel function and automatic hazard warning lights are just a few of the functions made possible by multiplexing. Continuing the ideas outlined by Citroen with the C3 Lumière concept car, the C3 is elegant, practical, reassuring and economical. It is a vehicle designed for a multitude of uses, for the town and the motorway, for daily tasks and for leisure.
B) PROMOTION
Chinese specifications
China is a complex market and in order to promote properly a foreign product in this country, a lot of criteria should be taken into consideration. First of all, the Chinese level of technology is quite high: nevertheless, there is a lack in terms of communication and advertising should be oriented towards the family, which is the core of the society. But we also have to communicate towards professionals and state institutions.
Citroen in its international expansion has always wanted to keep its identity and its values. Then by entering the Chinese market, we would like to follow our international development strategy and to adapt our communication to the chinese cultural environment.
Advertising
Then, as we said before, we have to target both family and individuals. It means that we should have two messages as different as the targets could be. Nevertheless, we could easily reach these two targets by using different advertising solutions.
Thus, to reach our first target, we are going to set up general campaigns in the printed press (newspapers, magazines) and on television informing the public of the location of the service, the availability of spares and the performance figures of the vehicle.
Then, to reach professional and state institutions, we are going to participate in all Motor Shows and to develop our communication by opening new sales points in the network.
Our message will be: « C3: a unique personality combining well being with all round versatility »
Public relations
If we choose to keep our French identity, we really should set up social missions. Thus, we should build schools, create a fondation and help the community. It should improve the awareness of the brand and give a good image as well. It could also set up good relations between state institutions and the brand which has to be taken into consideration as it is a big customer in the market.
Medias
To promote our product through the Chinese network, we are first going to make TV ads : 3 different spots broadcasted by CCTV and local TV channels (almost 850,000 people watch CCTV).
Then we are also going to choose several newspapers and magazines (50% in the consumer press -oriented to the family- and 50% in the business press.
C) PLACE
Strategy
After having developed as a priority the main elements of an efficient and high-quality industrial tool, the organisation of a modern sales system oriented towards the local customer was the subject of an ambitious programme.
With the strength of its experience acquired in almost 90 countries of bringing together respect for a common brand image while adapting it to local conditions, Citroen brings to the commercial field knowledge which is invaluable to its joint-venture in both the development of the network and in promotion and publicity.
Organisation
We will develop and organise actively a complete sales network with :
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Regional Offices, indispensable links in a country 20 times larger than France.
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Modernisation of the trading methods of the traditional network of resellers taking account of special economic and relational conditions specific to China.
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The branches : it set up a customer care service available 24h/24.
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The dealerships (3s or Sales, Service, Spare parts): the system of authorised dealerships, a recent set-up for China and encouraged by the Peking government, brings together the three great commercial activities, namely sales of new vehicles, after-sales service and spares in businesses exclusive to the C3 which respect the brand image standards and the commercial organisation of the brand.
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The garages (2S non-retailers) : they will provide after-sales service and spares.
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The Chrono workshops : these provide immediate maintenance without appointment.
D) PRICE
List price
Citroen don’t want to make an aggressive price policy to enter the market with this new compact car. There already are several models in the segment of Compact cars and major brands are now implemented in China and we don’t want to sell a cheap product at any price. Citroen want to keep their strong brand image while increasing with time our market share, and want above all to establish the brand. Thus, Citroen are going to sell the C3 at a price between 10000€ and 15000€ (between 70000 Yuans and 105000 Yuans: 85000 Yuans would be a very good price)
Discounts
Citroen could provide discounts to state institutions because they would be able to buy a big amount of cars. Citroen should develop a specific commercial policy towards professionals.
Financing & leasing options
Citroen are going to provide financing services. It means that we will have to make a partnership with local banks to provide a high range of services. It could help in getting market share in such a country where buying a car is often a huge decision because of the price.
Conclusion
China’s rapid economic development in the past twenty years has had a significant impact upon EU-China trade and economic relations. China is the EU’s third non-European trading partner after the US and Japan, and China's second largest export market. The EU trade deficit mainly reflects the effect of market access obstacles in China. The EU welcomed China's accession to the World Trade Organisation in late 2001, which came after 15 years of tough negotiations. Membership will bring benefits both to China and to its trading partners, cementing China’s place in the global economy and ensuring a greater degree of certainty for traders in China and world-wide.
references
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- http://www.freerepublic.com%2Ffocus%2Fnews%2F696603%2Fposts
- http://www.cia.gov/cia/publications/factbook/geos/ch.html#Military
- faculty.washington.edu/karyiu/WTO/links.htm
- news.bbc.co.uk/1/hi/business/1430770.stm
- tokyo.usembassy.gov/e/p/tp-20050603-06.html
- usinfo.state.gov/eap/Archive/2005/Jun/02-648829.html
- kotlermarketing.com/.../KMG.CN-strategic.marketing.in.china.pdf
- filebox.vt.edu/users/lesun/IV. AutoMarket Analysis.htm
