The rapid development in electrification and ‘smartification’ of the automotive industry in China is undeniably shaping and transforming the preferences of auto consumers in the country. Reciprocally, the evolving preferences and behaviors of Chinese consumers are exerting a profound influence on the Chinese auto industry, compelling it to embrace electrification and smartification with accelerating investments in these two areas. Such mutual influence is not only pivotal for the future of the Chinese auto industry but also poised to profoundly affect the technology development, business models, and competitive landscape of the global auto industry in the next five to ten years.
To gain deeper insights into the evolving preferences of Chinese auto consumers, McKinsey conducted the latest round of its annual China Auto Consumer Survey in the fourth quarter of 2023. The survey included 2,449 auto buyers in 19 major cities across China, representing a range of demographic attributes, such as age, income, and type of cars already owned. The goal of the survey was to establish a better understanding of buyer behavior—as well as overall attitudes toward automobiles—with the aim of developing insights that auto OEMs can use when crafting their strategies to meet changing consumer demands. From the responses, we identified six key trends.
1. Consumers are continuing the trend of trading up
The China auto market continues to introduce various competitive new models of smart electric vehicles (EVs), gradually increasing their attractiveness to consumers and shifting consumer attention toward mid- and high-price models. Meanwhile, escalating price competition’s impact on consumer decision making remains limited, with 80 percent of respondents indicating that price competition hasn’t accelerated their vehicle-purchasing decisions.
2. Perceptions of EV and internal-combustion-engine brands are diverging
Multinational OEMs no longer command premium prices, and their brand halos are almost gone, a trend especially evident in the EV industry. Meanwhile, owners of traditional premium multinational company brands are switching to premium Chinese EV brands—a trend flowing almost entirely in one direction.
3. EV penetration is rising fast, with a hidden concern of charging anxiety
EV consumers who make purchasing decisions are increasingly considering the performance of the vehicles themselves rather than regulatory incentives, such as free license plates. Also, acceptance of EVs by Chinese consumers has seen its first-ever decline, as EV-charging infrastructure is being deployed slowly in some areas. The situation highlights the extreme importance of optimizing charging infrastructure to support the sustained development of the EV sector.
4. Direct-to-consumer model is winning consumer trust, thanks to high transparency across customer journey
Premium Chinese EV brands have adopted omnichannel direct-to-consumer models, which have achieved remarkable customer satisfaction. Even in after-sales maintenance, where the previous year’s survey found a performance gap with traditional OEMs, premium Chinese EV brands are catching up.
5. Autonomous driving enjoys great popularity, but chance of monetization is coming under pressure
Consumer demand for autonomous driving continues to increase. However, the free-software strategy of top technology-oriented OEMs has made consumers less willing to pay for the related technologies. Among those willing to pay, the amount they are willing to pay has declined.
6. Consumers are aware of low-carbon vehicles but less willing than before to pay a premium for them
Nearly 70 percent of Chinese consumers are aware of low-carbon vehicles and willing to pay extra for them, but both the willingness to pay and the amount they would pay have declined.
We see the auto industry evolving, not involuting, under pressure. Guided by Chinese consumers, the EV sector’s growth at full speed is now an inevitable trend, and new consumer preferences and behaviors are emerging and developing. However, the fundamental commercial behaviors are constant: meet diverse consumer needs and create reasonable economic value.
Download the full report on which this article is based, McKinsey China Auto Consumer Insights 2024: Evolution, not involution (PDF–5.6MB).
