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White Paper: Emerging Overseas Car Markets

By Mike Richards Updated: 07/26/2022 Posted: 10/27/2015

When considering which markets to sell in, one’s thinking should mirror those of auto manufacturers who are planning on marketing their products in emerging markets. As such, a 360-degree view of the market should be considered, including not just simple economics, but also demography, and ground conditions such as fuel prices and road conditions and social factors that influence automotive consumers. The only difference a vehicle exporter will obviously be working on a much smaller scale.

The global auto market can be divided into two main markets, established and emerging, based on the level of demand for vehicles. Established markets are primarily those whose growth potential will be less than an emerging market as the market in established markets is more saturated. In emerging markets, the economies of these countries have developed to a point where consumer spending is beginning to increase, thereby creating a high demand for vehicles.

As the graphic below shows, the majority of emerging markets for new and used cars is found in Eastern Europe, South America, and Asia.


In light of the graphic presented above KPMG notes that: “Even far beyond 2020, China, India and Brazil continue to offer tremendous sales potential, as vehicle ownership rates in these countries will still be well behind that of established markets.” Although China remains a wildcard for smaller scale operations that are not shipping large volumes of vehicles due to trade barriers, a long-term view of emerging markets should certainly consider India and Brazil as markets in which to gain a foothold.

The data presented above mirrors other research conducted on consumer sentiment in these countries. According to Nielsen’s global online survey of automotive purchase intent:

“65 percent of respondents across 60 countries plan to buy a new or used car in the next two years. Demand, as expected, will be strongest in Latin America (75%), Middle East/Africa (75%) and Asia-Pacific (72%), where three or almost three out of four respondents intend to buy a car. More than half of North Americans (56%) and half of Europeans (50%) expect to buy a new or used car in the next 24 months.” (1)

When looking at the decision to buy new or used cars, Nielsen reports: “new car purchase intent is strongest in Asia-Pacific, where 65 percent of respondents say they will buy new, compared with only 7 percent that plan to buy used. In the region, this new car demand will be driven by consumers in India (77%), China (76%), Thailand (68%) and Indonesia (63%), where the expectation to buy is highest. While new car purchase intent also dominates in Latin America (47% new vs. 28% used), Middle East/Africa (45% new vs. 30% used) and North America (34% new vs. 22% used), the ratios of new to used car purchase intent in these regions are smaller. Meanwhile, in Europe, more respondents plan to buy a used (28%) rather than a new car (22%) in the next two years.” (2)

This designation of emerging and established should not be viewed as a cue to sell to emerging market as vigorously and quickly as possible. There are a number of nuances in market conditions which need to be considered.

Firstly, not all emerging markets are equal in their ability to offer the best conditions for importing new and used vehicles. As such, demand for new and used vehicles does not mean that any type of vehicle will sell in an emerging market.

For example, one consideration in the type of car that will be popular in an emerging market is infrastructure and geography. In countries with poor roads, there may not be a strong demand for cars with low ground clearance. For example, the most popular vehicles in the Dominican Republic, which is considered an emerging market with a poor road infrastructure and rough terrain, are SUVs and trucks.

In addition to practical considerations such as marketing, a vehicle that will be suitable for conditions, economic and demographic factors also play an important role in car buying habits. Some emerging markets listed above also have a segment of the population that is upwardly mobile. This segment of the population is a perfect target market, as they are inclined to buy a vehicle as a status symbol.

Nielson’s survey data on this issue shows that each particular region and country shows a unique type of emotional drivers which underlies the desire to buy a car. Nielsen reports that in Asia-Pacific three- quarters of respondents were motivated by status (75%), followed by the need for utility (69%). It stands to reason that the emotional “love to drive” connection for first-time car buyers in Asia-Pacific is not as strong (73%) as it is for existing car owners. Status (61%) and utility (61%) are equally important motivators, albeit to a lesser extent.

Similarly, in the Middle East/Africa and Latin America regions, a love of driving among existing car owners (85% Middle East/Africa; 83% Latin America) and status (69% Middle East/Africa; 49% Latin America) are strong motivators, followed by utility reasons (56% Middle East/Africa; 44% Latin America).”

As such, emotional drivers appear to factor heavily in the car buying decision. Thus, in countries where status is important, affordable luxury vehicles may be a strong bet, whereas in countries where utility is important, a vehicle that is safe, has good fuel economy and able to withstand rough road conditions may be more in demand.

Emerging Market Strategies

Given the variance in drivers of demand in emerging markets, the following is a summary of tips to consider when selecting a strategy to sell in emerging markets.

1. There must be a good fit for the consumer’s needs and its features.
2. Cars should have adequate fuel economy so that the cars do not have to be refilled far too much and far too often.
3. The car must have the right safety features, given the high level of road accidents in some emerging markets.

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(1) Reference 1
(2) Reference 2