Bain point of view, March 2015
Car ownership is losing its status and appeal as car sharing, rentals and other mobility services curry favor among consumers
Shanghai – March 24, 2015 – Once a status symbol in China, cars are becoming increasingly less attractive to own and drive, particularly in mega cities, due to poor driving conditions and more stringent regulations A new Bain & Company survey, China New Mobility Study 2015, of more than 2,100 consumers across six Tier 1 and Tier 2 cities found that approximately one-third of respondents who own cars and the nearly the same proportion of those intending to purchase a car say they would give up their cars or would not buy a new vehicle if conditions further deteriorate. They cite increasing traffic congestion and higher gasoline prices as the top two factors that would persuade them to give up car ownership. As a result, auto manufacturers face the dual challenge of protecting their core business while testing new mobility solutions, such as car sharing and rentals, to capitalize on new opportunities in China.
Bain's survey finds that car owners in China's mega cities are rethinking the value of car ownership. As rapid urbanization transforms China's urban mobility landscape, car owners are increasingly forced to contend with deteriorating driving conditions and tighter regulations, making car ownership in these large urban areas more expensive and less convenient, safe and, hence, less attractive. While nearly two-thirds of respondents associate car ownership with status, approximately 45 percent of current car owners and 55 percent of potential car buyers say owning a car is losing its appeal as a status symbol. Instead, Bain found that Chinese consumers care much more about their safety. Nearly 80 percent of respondents cited vehicle safety and personal safety as two of their top three priorities, with reliability and flexibility coming in second.
“Increasing income levels in China mean that consumers are able to afford the comfort of a personal vehicle, yet many are interested in alternatives to car ownership,” said Pierre-Henri Boutot, a Bain partner and co-author of the study. “The status and flexibility that comes with having a car is, for many, no longer worth the hassle and increasing costs.”
Amid shifting perceptions of car ownership in China, consumer preferences for alternative forms of transportation are on the rise. Although car rentals, ride sharing and car sharing are not well-known among Chinese consumers, Bain found approximately 40 percent of survey respondents said they were keen to use these options in the future.
Bain's research identifies several key opportunities for auto manufacturers to defend their core business in this new environment through loyalty programs and flexible solutions, such as car leasing, to attract new customers.
Auto manufacturers also have a key role to play in shaping China's new mobility solutions, particularly among China's younger and more connected consumers who want a safe, affordable driving experience, without the responsibility of car ownership. This includes deploying an affordable car sharing or rental model to rival taxis and public transportation.
“Car ownership isn't as attractive – or even necessary – in China as it once was, but access and mobility are in ever increasing demand,” said Raymond Tsang, a Bain partner, who heads the firm's Industrial Goods and Services and Automobile Practices in Greater China and co-authored the report. . “This shift will force major car companies to think and act more like technologists, marketers and even safety and environmental advocates if they are to develop new models of private transportation that are once again attractive and viable for consumers.”