China Car Buying Satisfaction Declines as Dealers Rack Up Losses

  • Citroen tops mass-market brands in customer sales satisfaction
  • Audi led luxury brands for fourth year in J.D. Power survey

Buying a car in China has become a less satisfying process for customers as service standards drop with poor dealer profitability, according to a survey by industry researcher J.D. Power & Associates.

The proportion of car buyers who found the sales experience better than expected dropped to 40 percent, from 64 percent in 2015, said Mei Songlin, J.D. Power’s managing director in China. The slide in satisfaction has coincided with the poor profitability among distributors, with about a third of them incurring losses, he said.

Citroen beat Hyundai to be the top mass-market brand by customer satisfaction, while Audi led luxury nameplates for a fourth straight year, according to J.D. Power, which first conducted the annual survey in 1999. Nissan and Mazda fell out of the top 10 rankings this year, after securing third and fourth place respectively last year.

Automakers are competing to build brand loyalty among customers and have to rely on dealerships to project their image and sell their wares. In China, where many customers rely on word-of-mouth and recommendations from friends and family, a bad experience at a distributor can hurt the ‘koubei’ or reputation of a brand despite millions of dollars spent on advertising.

Three-in-four dealers were either unprofitable last year or just breaking even, according to the China Automobile Dealers Association. With little sign of improvement in the economy and carmakers pushing too much inventory onto their ever-growing networks of retailers, the situation may worsen this year, said Zhu Kongyuan, secretary general of the China Auto Dealers Chamber of Commerce.

Tensions between dealers and manufacturers flared up in late 2014 and early last year. BMW, Volkswagen and Toyota Motor Corp. were among companies that agreed to lower sales targets and issue payouts to retailers to help cover dealers’ losses.

J.D. Power’s China Customer Service Index Study, in its 17th year, measured satisfaction among 15,000 vehicle owners who bought their models between May 2015 and February of this year.

— With assistance by Yan Zhang

Before it's here, it's on the Bloomberg Terminal. LEARN MORE