Given their low rates of car ownership, emerging economies are plum targets for automakers searching for the growth markets of tomorrow. Although the cyclical momentum driving car purchases has slowed somewhat over the last few years, a recent survey conducted by the Credit Suisse Research Institute suggests that ownership rates are still on the rise in China and Turkey and have lots of room to grow as the middle class expands in countries such as India and Indonesia.
Young Chinese Drivers Lead the Charge
China overtook the U.S. to become the largest car market in the world back in 2009, and the appetite of Chinese consumers has grown apace ever since.
Car ownership has been rising at an annual rate of 13 percent since 2010, when Credit Suisse first conducted its Emerging Consumer Survey.
In the latest poll, Chinese consumers showed the strongest purchasing intentions of all nine countries surveyed. The burgeoning car market reflects China’s increasing wealth, as car ownership tends to rise along with GDP per capita.
Young drivers between the ages of 18 and 29 are the fastest-growing group of Chinese car owners – 43 percent of young survey respondents reported owning a car in 2015, up from 22 percent in 2010. Most of them are first-time buyers. Unlike in many developed countries, where wealth is concentrated among retirees, young Chinese consumers have both the highest and fastest-growing incomes in the country.
Elsewhere in the emerging world, car ownership rates have been broadly stable. In one atypical case, Saudi Arabia, that’s because nearly every household already has a car. The only other booming car market among the countries Credit Suisse surveyed is Turkey, where car ownership has grown 6 percent a year over the last five years.
India and Indonesia: Two Wheels Rather Than Four
On the other end of the car ownership spectrum are India and Indonesia. Only 19 percent of Indian households own a car, half as many as in China. In Indonesia, the ownership rate is even lower, at 7 percent. It’s no accident that these countries are also the poorest in the Emerging Consumer Survey. Both Indonesia and India fall below the $5,000 GDP-per-capita threshold at which discretionary spending on large-ticket items, including cars, tends to rise.
Both countries also lack the basic infrastructure, such as roads and bridges, that would make cars practical investments outside the congested major cities. While India’s ongoing road program should begin to correct that problem, for the time being, most people buying vehicles still choose two-wheeled transportation such as bicycles and scooters.
Local Brands Still Outperform Premium Brands
For car manufacturers, understanding the brand preferences of consumers in emerging economies will be key to tapping into future growth. Despite their rapidly rising incomes, most consumers aren’t rushing to buy premium car brands. Of the marques consumers said they were most likely to buy, none of the top five in any of the nine countries was a premium brand. In China, for example, BMW came in behind Hyundai, while Mercedes-Benz was only 24th on the list. Audi was the most desirable premium brand in Brazil, India and Russia, but consumers ranked it only 13th, 8th, and 7th on their wish lists, respectively, in those countries.
Instead, consumers say they prefer the brands with the largest local market shares, including VW in China, Fiat in Brazil and Maruti in India. In countries such as India, domestic brands have been able to appeal much more to local tastes and budgets than foreign brands.
But even here, the picture changes as incomes rise. While low- and middle-income Indians show a strong preference for domestic brands Maruti and Tata, the country’s wealthiest consumers prefer Honda and Hyundai.
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