China Auto Biz: Zen and Art of Selling

Chinese car dealers have traditionally focused on revenue, but wealthier, savvier customers are demanding after-sales service

The retail side of China's auto industry has traditionally been rather crude. While in developed markets a lot of emphasis is placed on customer service as the dealer is the first physical point of contact between carmaker and client, Chinese dealers focus on revenue.

"They are not looking at it in terms of service," said Philip Coquelle, director of automotive research at ACNielsen China. "You really notice this when you talk to consumers - they don't see any differentiation. This means the customer may buy one car but the next time they don't buy the same brand."

This is unsurprising given the immaturity of the market - car penetration is still only 6% nationwide and 19% in the key consumption zones of Beijing, Shanghai and Guangzhou.

However, as the market develops and consumers become wealthier are exposed to a wider range of choices, the relationship between manufacturer and driver will become more and more important.

"Ultimately, dealers are not going to make a lot of money on the vehicle markup," said Joseph Liu, executive director of vehicle sales, service and marketing at General Motors (GM) China. "It is customer retention, customer loyalty and after sales services that gives them a reasonable business return."

In 2003, GM introduced China's first branded after sales service operation in a bid to improve the lines of communication between the company and its customers. It hopes to further ease access by putting sales and after sales departments under the same roofs.

"Customers are realizing that buying a car is not like buying a mobile phone," said Liu. "Price is important but you need after-sales service to cover you for the ownership period."

With this in mind, more potential buyers are doing their homework - and they are doing it well before setting foot in a car lot. ACNielsen found that only 5% of car buyers consider dealers as a source of information. Most will seek advice from friends and family, read magazines and, above all, check websites.

In this way, it is important that carmakers control their own press.

"You have to monitor what is being said on the internet," said Coquelle. "There have been cases where companies have not responded fast enough to news posted on the internet about faults or problems people have had and it spreads."

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