China's Car Economy Revs Up
BEIJINGShiny new cars line up outside a McDonald's drive-through on the suburban outskirts of Beijing. As Big Macs are passed through the windows of BMW sedans and Chery compacts, one thing is apparent: The country's recently developed passion for cars is paving the way for new business.
McDonald's Corp. runs 105 drive-throughs in China and is planning to build 300 more in the next three years to satisfy the new appetite for grab-and-go meals. "The rapidly growing car industry in China augurs well for McDonald's," said Kenneth Chan, chief executive of McDonald's China.
In an effort to spread wealth beyond China's big cities, China's central government has promoted the construction of more than 30,000 miles of expressways in the past decade. With its auto sales up 46% to 13.6 million vehicles last year, China is expected to have more than 200 million cars on roads by 2020, according to the Ministry of Industry and Information Technology.
That, in turn, has sparked changes akin to those spurred by the U.S. Interstate Highway System, which economists generally credit with lowering distribution costs, increasing manufacturing employment and boosting productivity. Business models that revved up in the U.S. a half-century ago to profit from newly motorized consumers now are finding their way to China.
The growth in car use has its costs, of course, such as polluted skies and road congestion. But it has brought gains to companies capitalizing on China's new car culture.
The obvious winners are auto makers like General Motors Co. and Ford Motor Co., which rebounded from last year's lackluster U.S. market in part by turning their focus to China, now the largest car market in the world. But the new mobility also means more consumers are staying in hotels, buying goods at suburban stores and listening to the radio while driving in their cars.
As middle class Chinese move out of cities, they are changing the economics of the retail sector. Consumers who once made several trips to a store each week because of limited space for purchases on their bicycle s are shopping less frequently but putting more goods in the shopping cart thanks to roads and cars.
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Liu Bo
Liu Bo has joined a growing number of Chinese taking weekend trips in their vehicles.
.To buy personal-care products, such as shampoo and soap, the average person made 0.5 of a shopping trip a week in mid-2010, down from 0.6 a year earlier, according to a study from McKinsey & Co. But the value of such items purchased rose 31%.
That is helping big-box companies like France's Carrefour SA and Home Depot Inc. of the U.S., which operate mainly outside city centers where large plots of land are more affordable. Carrefour in August opened its 160th outlet in China, a 77,000-square-foot store. Home Depot's nine stores average 90,000 square feet.
Consumer-goods makers and retailers may need to change their small-scale, single-product sales tactics, said Vinay Dixit, senior director of McKinsey's Asia Consumer Centers.
"In the U.S., you can buy a six-pack of a soft drink for a better price than buying individual cans, but in China people are only offered individual cans," Mr. Dixit said. "Now that they have a way to take bigger quantities home, consumers are looking for financial incentives to buy in quantity."
China Petroleum & Chemical Corp. is learning that when people come to fill their tanks, they often want more than gasoline. Sinopec, as the company is known, has built nonfuel sections in 15% of its 95,000 gas stations in the past two years, selling goods such as Great Wall wine and Kaimi brand fruit-washing cleanser.
Its first-half revenue from nonfuel purchases more than doubled from a year earlier to 2.64 billion yuan ($394 million).
The nascent domestic tourism industry also is on the rise as people who once were confined to a bus-route radius of their homes are taking long weekend road trips. Spending by tourists climbed 33% last year to one trillion yuan, according to research firm Euromonitor International.
Liu Bo, a 33-year-old production manager for a mobile-Internet company in Beijing, hops in his 2004 Jeep Grand Cherokee on the weekends to get away from the crowds of the capital, sometimes driving as far as Inner Mongolia, 500 miles away. Along the way, he buys produce from farmers and stays at campgrounds and hotels.
The hotel industry is eager to capitalize on travelers like Mr. Liu. Chinese hotel occupancy climbed 21% in the first half from a year earlier, according to research firm STR Global.
U.K.-based InterContinental Hotels Group PLC, the largest international hotel chain in China, with 132 hotels in 40 cities, plans to build 148 locations in the next five years. Budget-hotel operator 7 Days Group Holdings Ltd. of Guangzhou, China, with nearly 400 hotels across the country, plans to open at least 200 more by year's end.
Commercial radio is booming, too, now that marketers have discovered that their target audiencethe middle classes are tuning in on the road. Radio advertising revenue rose 4% to $1.1 billion last year while advertisers in other media pulled back amid the global downturn. Radio ad spending by makers of household cleaning products, clothing and home appliances tripled last year, according to media buying agency GroupM China.
Some businesses even have capitalized on the new car culture in surprising ways. A horse-racing track in Nanjing built six years ago has ended its racing daysand now is being used as a parking lot.
Sue Feng and Kersten Zhang contributed to this article.
China's Car Economy Revs Up - WSJ.com
Do anyone think this will work? if US place tariff on chinese goods beause of the currency war. china should place tariff on all the amercian goods such GM cars, wal-mark supermarket, kfc etc. Also chinese kids won't become fat. healthier for all chinese children.
BEIJINGShiny new cars line up outside a McDonald's drive-through on the suburban outskirts of Beijing. As Big Macs are passed through the windows of BMW sedans and Chery compacts, one thing is apparent: The country's recently developed passion for cars is paving the way for new business.
McDonald's Corp. runs 105 drive-throughs in China and is planning to build 300 more in the next three years to satisfy the new appetite for grab-and-go meals. "The rapidly growing car industry in China augurs well for McDonald's," said Kenneth Chan, chief executive of McDonald's China.
In an effort to spread wealth beyond China's big cities, China's central government has promoted the construction of more than 30,000 miles of expressways in the past decade. With its auto sales up 46% to 13.6 million vehicles last year, China is expected to have more than 200 million cars on roads by 2020, according to the Ministry of Industry and Information Technology.
That, in turn, has sparked changes akin to those spurred by the U.S. Interstate Highway System, which economists generally credit with lowering distribution costs, increasing manufacturing employment and boosting productivity. Business models that revved up in the U.S. a half-century ago to profit from newly motorized consumers now are finding their way to China.
The growth in car use has its costs, of course, such as polluted skies and road congestion. But it has brought gains to companies capitalizing on China's new car culture.
The obvious winners are auto makers like General Motors Co. and Ford Motor Co., which rebounded from last year's lackluster U.S. market in part by turning their focus to China, now the largest car market in the world. But the new mobility also means more consumers are staying in hotels, buying goods at suburban stores and listening to the radio while driving in their cars.
As middle class Chinese move out of cities, they are changing the economics of the retail sector. Consumers who once made several trips to a store each week because of limited space for purchases on their bicycle s are shopping less frequently but putting more goods in the shopping cart thanks to roads and cars.
View Full Image
Liu Bo
Liu Bo has joined a growing number of Chinese taking weekend trips in their vehicles.
.To buy personal-care products, such as shampoo and soap, the average person made 0.5 of a shopping trip a week in mid-2010, down from 0.6 a year earlier, according to a study from McKinsey & Co. But the value of such items purchased rose 31%.
That is helping big-box companies like France's Carrefour SA and Home Depot Inc. of the U.S., which operate mainly outside city centers where large plots of land are more affordable. Carrefour in August opened its 160th outlet in China, a 77,000-square-foot store. Home Depot's nine stores average 90,000 square feet.
Consumer-goods makers and retailers may need to change their small-scale, single-product sales tactics, said Vinay Dixit, senior director of McKinsey's Asia Consumer Centers.
"In the U.S., you can buy a six-pack of a soft drink for a better price than buying individual cans, but in China people are only offered individual cans," Mr. Dixit said. "Now that they have a way to take bigger quantities home, consumers are looking for financial incentives to buy in quantity."
China Petroleum & Chemical Corp. is learning that when people come to fill their tanks, they often want more than gasoline. Sinopec, as the company is known, has built nonfuel sections in 15% of its 95,000 gas stations in the past two years, selling goods such as Great Wall wine and Kaimi brand fruit-washing cleanser.
Its first-half revenue from nonfuel purchases more than doubled from a year earlier to 2.64 billion yuan ($394 million).
The nascent domestic tourism industry also is on the rise as people who once were confined to a bus-route radius of their homes are taking long weekend road trips. Spending by tourists climbed 33% last year to one trillion yuan, according to research firm Euromonitor International.
Liu Bo, a 33-year-old production manager for a mobile-Internet company in Beijing, hops in his 2004 Jeep Grand Cherokee on the weekends to get away from the crowds of the capital, sometimes driving as far as Inner Mongolia, 500 miles away. Along the way, he buys produce from farmers and stays at campgrounds and hotels.
The hotel industry is eager to capitalize on travelers like Mr. Liu. Chinese hotel occupancy climbed 21% in the first half from a year earlier, according to research firm STR Global.
U.K.-based InterContinental Hotels Group PLC, the largest international hotel chain in China, with 132 hotels in 40 cities, plans to build 148 locations in the next five years. Budget-hotel operator 7 Days Group Holdings Ltd. of Guangzhou, China, with nearly 400 hotels across the country, plans to open at least 200 more by year's end.
Commercial radio is booming, too, now that marketers have discovered that their target audiencethe middle classes are tuning in on the road. Radio advertising revenue rose 4% to $1.1 billion last year while advertisers in other media pulled back amid the global downturn. Radio ad spending by makers of household cleaning products, clothing and home appliances tripled last year, according to media buying agency GroupM China.
Some businesses even have capitalized on the new car culture in surprising ways. A horse-racing track in Nanjing built six years ago has ended its racing daysand now is being used as a parking lot.
Sue Feng and Kersten Zhang contributed to this article.
China's Car Economy Revs Up - WSJ.com
Do anyone think this will work? if US place tariff on chinese goods beause of the currency war. china should place tariff on all the amercian goods such GM cars, wal-mark supermarket, kfc etc. Also chinese kids won't become fat. healthier for all chinese children.
