Chinese automakers going after third tier cities

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With first and second tier cities such as Shenzhen, Shanghai, Beijing etc bursting at the seams with cars, its not surprising that Chinese automakers are going after third tier cities where car sales are still rather low, but have a definite room for growth:

After auto sales tumbled in the third quarter in first- and second-tier cities, a survey by Sinotrust, a Beijing-based marketing research and consulting company, suggests that it is time for China-based auto makers to target the smaller third-tier cities.

Third-tier cities saw their auto sales rise 12 percent in the third quarter, showing a high growth potential, while the market situation “will continue to deteriorate in the first- and second-tier cities as a result of the financial crisis,” Lang Xuehong, a Sinotrust executive, said to the Chinese language Economic Observer.

Growth potential is also high, Lang said, in cities in China’s central and western regions – evidenced by a 24 percent increase in car sales in those regions in the first 11 months of 2008, much higher than the 7.3 percent national average, according to National Passenger Cars Association of China.

Purchasing power of smaller cities can be further strengthened as the central government’s 4 trillion yuan ($586 billion) stimulus package boosts agricultural business, industry observers said.

With many automakers making some really good small cars these days, that also come at really small prices, it would be foolish of them to try and push their new small cars anywhere else other than third tier cities, where often yearly salaries are around 30,000rmb at the high end. Cars such as the BYD F0, Chery S18, Geely Panda, would be well received in third tier cities for their good looks, and low prices. However, larger cars such as the Brilliance BS4, and the Chery A5 have also sold well in suburban areas.