By Alisa Priddle
Detroit Free Press
BEIJING -- Juan Lu and her
husband, Jun Gao, can't suppress their new-car grins. The young Chinese couple have
taken delivery of their first car, a Ford Mondeo midsize sedan, from a Ford
dealership in western Beijing. They are part of a burgeoning
middle class that wants to trade in their subway tokens for their own wheels to
get Lu to work at the hospital and Gao to his government job, and also take
them away for a weekend holiday.
Automakers like Ford and
Fiat-Chrysler are racing to establish themselves in China to meet this growing
demand while dominant players such as General Motors, Volkswagen and Hyundai
invest to maintain their leadership.
While growth has slowed in the
world's largest market, the sheer volume and sales potential mean no one can
afford not to compete in China. There has always been wealth in
China. With a population of 1.3 billion, there are more than a million
millionaires and the number keeps growing, making it a target-rich environment
for large luxury vehicles with hired drivers and sumptuous backseats.
Driving is a harrowing experience
China is a country where driving
is not for the faint of heart, especially in major cities, but that has not
curbed consumer appetite for vehicles. The congestion -- it can take
hours to travel a short distance in Beijing -- has bred precision driving
skills on roads where pedestrians, bikes, scooters and odd three-wheeled
minicars give way to larger luxury cars and alpha buses that blare their horns
incessantly to warn everyone to move aside.
The overarching rule: first is
right, meaning the vehicle closest to a gap in traffic goes for it. Lane
markings and red lights are mere suggestions. Against all logic, left-hand
turns are executed from the far-right lane in an asphalt dance where the spaces
between vehicles and their surroundings are measured in inches. Near-misses are
constant, actual accidents surprisingly rare.
Into this mix now wade an excited
Lu and Gao, both 30, who live frugally and have saved for their first car for
as long as they can remember. They bought a Mondeo because it
cost less than the Volkswagens, Hondas or Buicks they researched online. "Our friends bought a Mondeo
and recommended it," Lu said. "We picked Ford because the Mondeo
price is affordable and the car is very big, safe, spacious and good for family
use."
Word of mouth and Internet
comparisons are as important in China as in any mature market.
They paid 150,000 yuan, or
renminbi (RMB) in cash, about $23,834. Credit is available in China, but less
than 20% trust or use it. Lu and Gao got financial assistance from their
parents instead.
Lotteries for licenses
The couple won the lottery in
February -- the one that gave them a license plate. Megacities like Beijing and
Shanghai with populations of about 20 million and 23 million, respectively, are
addressing traffic gridlock and smog by restricting license plates.
Beijing issues 20,000 new plates
a month. Would-be car buyers stand a 1-in-32 chance of securing a plate that
allows city driving six days a week. The last number on the plate determines
the days the car can enter the city. Driving on the unauthorized day can be
punished by a fine or even imprisonment. In Shanghai, 8,000 plates are
auctioned monthly and sell for an average price of 45,300 RMB or $7,200.
Lu and Gao beat the odds and won
a license plate in the February draw. They ordered their new Mondeo in April
from Zhangqi Furui Ford. "Furui" means lucky, said sales manager Wen
Gao Jiang. The model they wanted was not
among the roughly 100 vehicles in stock so they waited 10 days for it to
arrive. Delivery day provided a joyous excuse to be late for work.
Both have their driver's licenses
-- no small feat in China where there is a series of about 10 stations to pass,
including written and driving examinations, as well as sight, hearing, strength
and flexibility tests, involving squats and other calisthenics that may take
westerners by surprise.
But Lu said she might leave most
of the driving to Gao."I'm not good at it," she said with a shy
smile. Zhangqi Furui is one of about 400
Ford dealerships in China. That will grow to 700 by 2015.
"Overall, Beijing car sales
are down more than 50%," said Jiang, who has sold cars for almost six
years. He insists the Ford dealership is not down as much as the competition
and hopes to see sales double in the next few years with the new Focus and four
utility vehicles in the lineup.
Spinning wheel in service
department
Customers who spend 1,000 RMB
(about $160) on service at Zhangqi Furui can spin a wheel for a chance to win a
prize or gift to show customer appreciation. Jiang said service brings in 70%
of revenue. When between 60% and 70% are
first-time buyers in China, first impressions are crucial. That is why Ford doesn't want to
add more than two dealerships a week, to ensure it is done right, said Joe
Hinrichs, president of Ford Asia-Pacific and Africa. But he knows 400 dealers
in a country of 1.3 billion people means accessibility is limited.
At a flagship Buick dealership in
the eastern part of Beijing, the showroom and service areas are massive. The
dealership sold 1,200 vehicles in 2011 with about 11 salespeople and another 77
staffing the 45 service bays and paint shop that service about 36,000 vehicles
a year.
Tea and massages
Common waiting areas have room
for extended families, including grandparents, who pick up the new car or spend
part of the day waiting for their car to be serviced. There are VIP lounges for elite
business clients with formal tea service areas and high-end massage chairs to
work muscles from head to toe.
There are 3.7 million Buick
owners in China and 60% of sales are high-end, said Jean Liu-Barnocki, brand
director for Buick China, which has 114 dealerships offering full coverage in
larger tier 1 and 2 cities and 50% coverage in smaller tier 3 cities. "We try to standardize the
sales process from the way we welcome them into the showroom to the sales
process and even the walk through the dealership," Liu-Barnocki said.
GM will expand its retail network
from 2,900 in 2011 to 3,500 this year, including the Buick, Chevrolet, Cadillac
and the new Chinese Baojun brand, said Kevin Wale, president of GM China. To meet demand, CEO Dan Akerson
said GM is on track to boost production capacity in China to 5 million vehicles
a year by 2016.
Growth will come from smaller
cities
GM is determined to hang onto its
No. 1 sales status in the country by expanding into midsize cities in China's
interior to make up for a drop-off in cities like Beijing because of the
license restrictions.
An Ernst & Young report said
the restrictions will continue to dampen vehicle sales. Large cities like
Beijing could see half their dealerships go out of business with smaller
domestic Chinese automakers taking the brunt of the pain. But it has to be done, said Yale
Zhang, managing director of Automotive Foresight in Shanghai.
Beijing now has 70 cars for 1,000
people and almost total gridlock. In the U.S., there are more than 700 cars per
1,000 people. But that density is just not feasible in China's megacities. "Beijing's congestion can't
handle it," Zhang said.
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