Bigger families mean bigger market for MPVs

Demand for multipurpose vehicles to rev up in China thanks to second-child policy, experts say

After strolling around the Auto China 2016 expo, which ran in Beijing from April 25 to May 4, and checking out 1,000 cars from more than 100 automakers, Luo Xin saw his future.

"Multipurpose vehicles are perfect for families," says the 36-year-old bachelor, who explains that he plans to marry soon and have children.

A model poses in a multipurpose vehicle at a recent auto show in Yichang, Hubei province. Sales of MPVs have risen sharply in China, making them a hot segment of the industry. Liu Jiao / For China Daily

The Volkswagen Multivan is one of his favorites, as the price is similar to a Mercedes-Benz V-Class, although he says he'd likely choose the Toyota Sienna because it is cost-effective and safe.

Luo, who runs an English training institute, already owns three cars: a Buick GL8 for picking up students and parents; a Mercedes-Benz E320L for meeting clients; and a Porsche Boxster for fun.

He reflects a change sweeping the passenger car market in China, where consumers no longer view vehicles as a means to show off, but as machines that serve a practical purpose.

With the second-child policy now in place, more couples are expected to have two children, which is likely to boost the MPV segment.

The segment has grown rapidly in recent years. Sales hit about 1 million units in 2013, accounting for almost 7 percent of the passenger vehicle market, just 4 percent less than small cars.

Last year, MPV sales soared to 2.2 million units, up 10.1 percent year-on-year, accounting for 10 percent of the overall market and making it the fourth-largest segment.

Industry insiders predict that MPVs will this year overtake mid-size cars to become the third best-selling auto segment in China, just behind compact cars and sports utility vehicles.

Naturally, automakers are optimistic about the future of MPVs in China.

"We see great potential for high-end MPVs like the V-Class," says Guido Krupinski, CEO of Fujian Benz Automotive Co, a three-way joint venture between Daimler Vans Hong Kong Ltd, BAIC Motor Corp and Fujian Motor Industry Group Co.

"With the economy as well as individual incomes growing, domestic elites will have more diversified and individual demands for trips. So the market for high-end MPVs that can satisfy both family and business demands will continue to grow."

Krupinski says the second-child policy will have an impact on the population structure, family structure and economic development in the decades to come, and he believes that a bigger family size will create a need for bigger cars.

Hiroji Onishi, head of Toyota's China operations, told Reuters that MPVs have good prospects in China: "Given the changing life-stage needs, we think what's going to be popular are smaller, more affordable MPVs like the (Toyota) Noah Voxy, a compact minivan that we market in Japan."

He was quoted as saying that young Chinese couples tend to live near their parents, so the second-child policy is expected to make family units larger.

According to Reuters, Toyota officials and dealers think the Voxy's interior comfort offers a more subtle way for China's rich to signal their wealth in a climate where overt excess is frowned upon. And in China, trends that catch on at the premium end traditionally spread quickly through the rest of the market.

China's MPV segment is divided into several niche markets. Low-end models priced below 100,000 yuan ($15,200; 13,600 euros) currently account for the majority of sales.

For example, the top best-selling models last year were the Wuling Hongguang microvan and the Baojun 730 minivan, both produced by SAIC-GM-Wuling, a joint venture between General Motors, SAIC Motor Corp and Guangxi Automobile.

Popular models priced from 200,000 to 400,000 yuan are the Buick GL8 and the Honda Odyssey. For the high-end niche, the typical model is the Mercedes-Benz V-Class, a replacement for the Viano, which ranges in price from 500,000 to 600,000 yuan.

Zeng Zhiling, managing director of LMC Automotive Consulting, says the most important reason behind the rise in MPV sales is the China Association of Automobile Manufacturers' rejig of vehicle categories in 2013, which saw MPVs classified as minivans.

The rising demand for logistics and commuting in the lower tier cities and towns, as well as the expected rise in use of MPVs by high-end families in the wake of the second-child policy, are also key reasons, he says.

"But the market for high-end MPVs is small, about tens of thousands of units a year," Zeng says, adding that he predicts the growth rate of the segment will slow down and that low-end MPVs will continue to contribute most sales.

Zhang Yu, managing director of Automotive Foresight Co, forecasts that the segment will grow at a rate of more than 10 percent year-on-year for the next five to six years. He agrees that low-end models will largely drive the sector.

"Many people say an MPV is the next breakthrough point, but I'm not sure," he says, adding that MPVs lack good models that can compete with SUVs in off-road functions and in terms of reflecting the car owner's taste and social status, which is vital in China.

Zeng says most MPV buyers are from semi-urban areas and have budgets of 50,000 to 70,000 yuan. "The customers decide the products, not the producer," he says.

duxiaoying@chinadaily.com.cn

(China Daily Africa Weekly 05/27/2016 page26)