In the Year of the Horse, there is no letting up in China’s passion for luxury horsepower. Despite concerns over economic slowdowns and government regulations, the number of new manufacturers and new models competing in this sector continues to grow. In ‘Auto insights: the luxe edition’, we’ll take you on a tour of the high-end of the auto market and the changing meaning of luxury itself, including:

1. Automotive insights:
The luxe edition
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2. 1
Contents
As the luxury market in China
shows no signs of stalling, we look
at what motivates luxury customers
– and how the automotive industry
needs to respond.
www.tnsglobal.com
From the editor
Mapping a new route to
luxury auto success
Why luxury auto brands
need a precision playbook
Controlled acceleration
Network management in
the driving seat
The forum: How can auto
brands drive success with
luxury buyers?
Luxury is mass
Luxury brands in China: The
cross-category view
A promising road ahead:
Skilled drivers needed
3
4 - 7
9 - 15
16 - 19
20 - 23
24 - 29
30 - 35
36 - 39
40 - 41
Get in touch42
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3. 3
Dear fellow auto lover,
In the Year of the Horse, there is no letting up in China’s passion for luxury horsepower.
Despite concerns over economic slowdowns and government regulations, the number of new
manufacturers and new models competing in this sector continues to swell.
The 2014 Beijing auto show saw no less than 45 luxury vehicles on show, with 15 of those
models making their world premiere at the event. And premium vehicles represented
the undeniable centerpiece of the show for both critics and consumers. The One1 from
Koenigsegg was voted the highlight with attendees, with the McLaren P1 in second place.
On the floor, nobody could get near to the BMW Vision of Future Luxury whilst the Lincoln
MKX was one of the event’s best-reviewed vehicles. Between them, these standouts show just
what a diverse place the luxury auto grid in China has become. This is a category that offers
consumers comfort, excitement and exhilaration. For manufacturers of all shapes and sizes it
still appears to offer an exceptional growth opportunity, but it is an opportunity that must be
navigated with increasing skill.
In this report, we’ll take you on a tour of the high-end of the auto market as revealed in
Beijing, fuelled by TNS’s years of observation, expert views on network management and
brand differentiation, and the changing meaning of luxury itself within China. We’ve also
sought out the perspectives of pioneers in other luxury sectors for additional insight on how
to build relationships with a new generation of luxury consumers.
Enjoy the ride – and please get in touch if you would like to discuss any aspect of the auto
industry in China or beyond.
Yours Faithfully,
Guillaume
Guillaume.Saint@tnsglobal.com
+86 21 2310 0870
Guillaume Saint
Managing Director
Automotive Practice, TNS APACFrom the
editor
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4. 54
The established markers of luxury in
the premium car market comprise
a ‘savant mélange’ of popularity,
heritage, extravagance, quality,
innovation and performance.
At the same time though, our studies also identify the emergence of new differentiated
needs in China. If brands can develop offerings which speak to these needs, they are
likely to be able to increase their influence at the point of purchase and help seal the deal
with customers. The consumers influenced by these new emerging lifestyle needs can be
categorised into three groups:
Connoisseurs, fascinated by engineering and the technical details of car design that
promise enhancements to performance, control or driving safety. These are true believers in
the capacity of advanced technology to improve the driving experience. They are discerning,
seeking out innovation and comparing technical details across brands.
Easy-going, self-focused customers, who prioritise comfort and personalisation.
They want a car that functions as a luxury cocoon: comfortable and easy to handle. They are
less constrained by others’ opinions and put their own feelings at
the forefront of their decision criteria.
Their car must be a convenient and enjoyable place to be. The growing importance of
personalization through options, accessories, and customer service reflects brands’ responses
to this group.
Fashionistas are the early adopters of new trends, determinedly expressing
individualism and self-assuredness. Their need is to be the focus of attention – they display
their individual taste through their car choice, and they won’t compromise to fit in with
public opinion. They are more influenced by Western value and small, fashionable cars -
which contrast with the traditional codes of luxury - may attract them. Co-branding with
fashionable apparel brands can reinforce appeal amongst this group.
As Guillaume Saint explains, the emergence of new lifestyle
needs is creating opportunities for challenger brands
The mechanics of premium brand success for auto are inherently
similar to those of the other luxury sectors like jewellery, luggage,
cosmetics or apparel. Customers are most likely to consider luxury
brands that convey values they identify with, make a clear promise,
and project an immediately recognisable badge of success. However,
the nature of the promise and values they seek may be starting
to evolve.
The established markers of luxury in the premium car market
comprise a ‘savant mélange’ of popularity, heritage, extravagance,
quality, innovation and performance. These are traditional values
that bestow customers with symbolic wealth and status - belonging
to a higher social class - and a self-confidence boost. And a great
many premium car customers still adhere to them when making
their final choices. ‘Face’ is still a critical factor for them so they
take peers’ opinions into serious consideration. With many luxury
customers intrinsically less knowledgeable about vehicles than their
peers in other markets, choice of model is first and foremost an
expression of social status.
Guillaume Saint
Managing Director
Automotive Practice, TNS APAC
success
Mapping a new route
to luxury auto

5. 76
These three emerging auto
audiences are still relatively small,
but growing in size and influence.
And amid the increasingly
crowded luxury auto market they
offer new entrants an opportunity
to compete on the basis of
design, features, equipment
and services, rather than relying
upon existing popularity or brand
heritage.
We foresee that the increasing
influence of these new auto
buying needs will lead all
manufacturers to put forward
complete car experiences that
move luxury vehicles from
transport tool to a holistic
experiential endeavour. This is a
recipe for innovation and pushing
boundaries – and for an exciting
future for luxury auto in China.

6. 9
For luxury auto brands, as for almost any other type of car maker,
China is starting to resemble a gold rush. Growth of 22% between
2012 and 2013 has ensured that every possible premium brand
is not only present in the market, but moving to strengthen that
presence – and this despite forebodings around slowing GDP
growth and regulations against conspicuous consumption. As this
year’s Beijing auto show demonstrated, most are putting their
faith in ever-expanding product lines to retain and grow share, and
ensure entry points for the next wave of first-time luxury buyers.
But in an increasingly crowded market, the time is coming to apply
some precision to how they manage their portfolios, and how they
manage their brands.
The line-up keeps growing
China’s luxury market is currently dominated by the big three
German brands, with Audi, BMW and Mercedes-Benz commanding
a combined share of 75% in 2013. However, the challengers
are arriving. Lexus, Land Rover, Volvo and Cadillac have already
launched. The revived Red Flag introduced the L5 limousine at the
Shanghai Auto Show last year, and Ford is looking to launch the
Lincoln brand during 2014.
Anthony Lau
Research Director
TNS Automotive China
playbook
precision
Why luxury auto brands
need a

7. 1110
Customers are taking
significantly longer to
make decisions because
navigating all of the
options is becoming
intimidatingly complex.
The variety of luxury models is expanding
every bit as rapidly as the variety of brands.
Just 20 years ago, the luxury auto market
consisted almost entirely of sedan models
such as the Mercedes-Benz E-Class and
BMW 5 Series. Now BMW boasts a China
line up with every Series number from 1 to
7, including the recently launched 2 Series
and 4 Series. And that’s before we start
on X Series SUVs, Z Series sports cars or
electric models from its new i sub-brand.
The luxury grid becomes more crowded
still when we take the increasing number
of localised versions of these marques, sold
alongside them in dealerships and offered
to buyers as an alternative choice. Localised
versions of the Mercedes-Benz GLK, BMW
X1, Audi Q3 and Cadillac’s XTS and ATS
are already helping their manufacturers to
avoid heavy import taxes whilst potentially
appealing to more price-sensitive buyers.
A crowded market demands
differentiation
This rapid proliferation of luxury brands
seems at first glance to be a sign of a
market in robust health. But it is in fact
creating significant challenges for both
car-makers and their customers. We see
the impact in the increased consideration
process for luxury auto buyers. Customers
are taking significantly longer to make
decisions because navigating all of
the options is becoming intimidatingly
complex. Luxury auto dealers meanwhile
are struggling to find space in showrooms
for all of the models on offer. And these
challenges of distribution are only just
beginning.
Manufacturers face another challenge
that is arguably more significant still. The
immense difficulty of differentiating a

8. 1312
luxury brand in an increasingly crowded marketplace
– especially when Chinese auto buyers’ first
experience of their brand involves such a huge
variety of models. Traditionally, car manufacturers
have always been successful in differentiating
themselves from competitors through their products.
BMW had their rear-wheel drive sedans; Audi had
Quattro technology; Porsche has rear-engine sports
cars. However, maintaining differentiation via the
product is becoming increasingly challenging as the
portfolio of each manufacturer continues to grow.
Western auto brands must also recognise that their
brand heritage will not translate automatically into
the Chinese market. Ask a Chinese auto buyer
about the type of vehicles that they associate with
Porsche and they will talk about 4-seater Cayennes
and Panameras rather than iconic 2-seater 911s.
This is not to say that there is anything particularly
inappropriate about Cayennes and Panameras in the
Chinese market – but they must compete against
a broad range of other powerful 4-door vehicles
without the immense brand heritage advantage that
comes from association with the 911.
Time for precision portfolio management
Increasingly, the success of luxury brands in the China
marketplace will depend on their applying far more
precision to the development of their portfolio. They
must prioritise models based on the features that
genuinely appeal to China’s luxury buyers, but also
based on intelligent analysis of the models that will
most effectively differentiate their brand position. At
the same time, they must prioritise the distribution
and the promotion of those vehicles that will deliver
the greatest sales volume – and the greatest revenue.
How can luxury auto brands set about refining their
portfolios to drive sustainable growth and protect
share through brand differentiation?
...the success of luxury
brands in the China
marketplace will depend
on their applying far more
precision to the development
of their portfolio.

9. 1514
Now the real luxury brand battle starts
In all of these areas, the manufacturers behind luxury auto brands must identify the gap
between their intended global positioning and local realities. They must set clear guidelines
for delivering differentiation on the ground that can generate the local positioning that they
seek, and ensure that this is delivered consistently across all touch points and over time.
However, these guidelines also need to be flexible enough to allow for local interpretation
and adaptation. As brands battle to build new, relevant positions for the Chinese market,
we are about to witness one of the most exciting phases in one of the most dynamic auto
markets in history.
1
3
2
Base product differentiation strategy around a full
understanding of functional and emotional needs
Catering to the tastes and preferences of Chinese customers
Prioritise on multiple levels
Brands must interrogate how the emotional needs of auto buyers align with the
social image and functional benefits of their brand, and they should prioritise
vehicles and product features that reinforce this connection.
Chinese car owners have different driving habits formed in a different driving
environment and on different road conditions to those experienced in many other
markets. For the most part, they also have significantly less experience of owning and
driving vehicles. As a result, they have very different expectations and priorities when
it comes to the features of a luxury car, and a different level of willingness when it
comes to paying for them. Many luxury auto brands are already establishing design
centers in China to understand and cater to the tastes and preferences of Chinese
car buyers for both exterior and interior features. Brands such as Audi, BMW, Volvo
and Land Rover have already launched long wheelbase versions of classic marques in
order to appeal to Chinese drivers’ preferences.
To maximise resources efficiently, brands must determine which models will most
effectively create brand differentiation and support the overall communications
strategy, and which models will need to be present at the dealership as display
or test-drive vehicles to support on-the-ground sales activities. This may involve
vehicles for different roles: high-profile models to attract premium car buyers, as
well as entry-level vehicles that may prove the strongest source of sales amongst
China’s high proportion of first-time buyers.
Three steps for sustainable growth:

10. 1716
Ferrari’s Edwin Fenech has been evolving the brand’s age-old
scarcity strategy for China
Enzo Ferrari famously stated that his company would “always sell
one car less than what the market requires” As Edwin Fenech,
Greater China President and CEO of Ferrari explains, 50 years on, it’s
this philosophy that steers the brand’s strategy for China.
“We are not here to sell volumes – if we sell a car, we have to sell
it in the proper way and make people understand what they are
buying: our heritage, our values and the technology that we have in
our cars,” he says.
While Fenech acknowledges that China is likely to be the company’s
largest market further down the road (it is currently second only to
the US), his focus isn’t on racing to get there. Brand guardianship is
key: nurturing an “evolution of the mindset of people”, and keeping
the brand true to the DNA of Ferrari.
Exclusivity is crucial to Ferrari’s global strategy. After 2012, its best
ever year, the company actually decided to reduce the number of
cars that it sold in order to maintain exclusivity and brand value. The
number of cars delivered to the network dropped to 6,922 (down
5.4 per cent) in 2013, yet Ferrari was able to leverage brand value to
increase revenues by 5 per cent, eventually
reaching an unprecedented €2.3 billion. At
the same time though, Ferrari has focused
on maintaining distribution in markets such
as China, which are experiencing extremely
strong demand.
Ferrari’s exclusivity-focused business model
may seem like a hard sell in a country where
status buyers are unaccustomed to waiting
for luxury items – but Fenech is confident
that an emerging category of auto buyer
is very much in-tune with the Ferrari
philosophy. “People want to differentiate
themselves in different ways,” he says. “The
most wealthy want unique products. That’s
why I think a lot of brands in China are
making limited editions.”
Ferrari has shown its respect for Chinese
culture. During 2012, the Year of the
Dragon coincided with the 20th anniversary
of its first sale in the country. The brand
marked the occasion with twenty 458
Italia China models, each incorporating
traditional Chinese ‘long-ma’ (dragon-
horse) elements and craftsmanship such
as calligraphy in the interior and golden
dragon insignia adorning the bonnet. Now,
to mark the Year of the Horse, the brand
has created a ‘Year of Prancing Horse’ logo,
aligning its historic pursuit of excellence
with the Chinese zodiac’s symbol for
persistence and success. The logo itself
incorporates Chinese traditions in text and
calligraphy with the nobility and heritage of
the Ferrari brand, echoing the Imperial Jade
Seal of Chinese dynasties.
At the same time as maintaining exclusivity
and aligning its brand with Chinese culture,
Ferrari has focused on driving up service
quality. The brand has opened an employee
and dealer training centre in Shanghai
(the brand’s first outside Italy). And it
has invested in building multi-channel
Edwin Fenech
Greater China
President and CEO Ferrari
acceleration
Controlled
The most wealthy want
unique products. That’s why
I think a lot of brands in China
are making limited editions.

11. 1918
experiences around its brand: a Ferrari Myth exhibition
in the former Shanghai Expo Italian pavilion, the Ferrari
challenge series, which enables owners to race on an
F1 circuit, extended warranties and virtually unlimited
customisation options. “These are all things that are quite
unique to Ferrari,” says Mr. Fenech. “We sell the cars,
but being present for the after-sale services is
absolutely the key.”
There are challenges to building an infrastructure around
a brand with such high standards. Finding centrally
located dealership locations is difficult given space
requirements, technological needs and competition
among luxury brands. Mr. Fenech adds that “the right
location today is not necessarily the right location of
tomorrow” and that assessing the evolution of each city
in China is important. Retaining high-quality employees
is another challenge. “In this booming situation in China,
talented people are solicited by every other company –
especially because Ferrari is a benchmark,” says Fenech.
Social media is a key element in this luxury brand
experience. Ferrari has focused on Weibo, attracting
385,334 followers in China by May 2014. “Especially now
in China, social media has become a must,” says Fenech,
though here as elsewhere careful management of the
brand is essential.
Yet for this contender in the luxury auto sector, the
quest for brand differentiation makes all such challenges
worthwhile. Many consumers have yet to differentiate
between the various high-end sports car manufacturers
– and this gives a valuable advantage to the first brands
to demonstrate values in practice. “That’s why we are
working on branding in order to create a difference,”
says Fenech. “It’s to put Ferrari in its deserved position,
which is leadership.” He plans to get there at
Ferrari’s own pace – always one car less than
the market demands.

12. 2120
Lou Tao of Sinotrust explains how effective network management will be vitally
important in phase two of China’s super luxury auto market
Economic headwinds and government regulation may have slowed growth for super luxury
auto brands in China recently, but those brands haven’t taken their foot off the accelerator
when it comes to building their distribution networks. By the end of 2013, Porsche, Bentley
and Maserati had built 57, 36 and 45 dealerships respectively in mainland China.
driving
Network management
in the
seat
Lou Tao
Automotive Marketing
Solutions Sinotrust
57 3645
Porsche
Bentley
Maserati

13. 2322
Amid the fast network expansion and sales growth, service quality
has become a problem that threatens to hinder the development of
these brands. To rectify this and drive growth, they must prioritise
rational and effective network management.
The network management challenges for super luxury auto brands
can be summarised as follows:
Imperfect management system: Most super luxury
auto brands haven’t built a perfect network management system
suitable for the Chinese market so they cannot effectively control
the dealers within their networks. Huge variations in the level of
management experience and the limits of the current network
management systems have largely held back their efforts to improve
services.
Lopsided management: Most super luxury auto brands
are focused on driving sales, but they have not been able to enforce
standards in after-sales management and are therefore weak in this
area. Super luxury car owners who have paid a hefty sum for their
cars have very high requirements and expectations on product and
service quality. When experience fails to meet these expectations, it
undermines satisfaction with the product and the brand.
Unsophisticated management measures:
As their networks grow, many super luxury auto brands rely on
mystery shopping and customer satisfaction surveys to evaluate
management standards and service compliance. But this kind of
evaluation stays at the level of customer experience, and cannot
offer a comprehensive picture of how dealers are implementing the
automakers’ standards and requirements. Brands need to introduce
dealer audits to check performance, and then use the results to help
their dealers improve.
We believe that network management standardisation is inevitable
for super luxury auto brands in China. But to meet the individualised
needs of picky super luxury car owners, standardised network
management is not enough. Super luxury auto brands should also
create distinctive management control systems based on their own
brand character.
Amid the fast network
expansion and sales growth,
service quality has become
a problem that threatens to
hinder the development of
these brands.

14. 2524
What luxury
strategies will
deliver success
for auto
brands in the
Year of the
Horse?
We asked three
of the industry’s
key players for
their predictions.
Allen Lu (AL)
Managing Director,
Asia and Oceania Operations
Infiniti Motor Company Ltd.
Simon Chen (SC)
Deputy General Manager,
Acura Business Division of
Honda Motor (China)
Investment Co, Ltd.
Dong Fang (DF)
Interactive Marketing Director
Audi Sales Division, FAW-VW
TNS: How would you define luxury
for auto brands?
Expression of identity
“Luxury is about social identity, status and recognition.
It is a reflection of individual opinion, taste, and value.”
Convenience and time-saving
“Luxury saves your time. For example, a good quality car has less chance
to break and better quality service, which saves you waiting time.”
Future-facing
“Luxury for me is a mixture of future-orientation, high-technology and
product innovation.”
AL:
SC:
DF:
luxury
The Forum: How can auto
brands drive success with
buyers?

15. 2726
TNS: How can auto brands
grow the luxury market?
TNS: What will be the keys to
customer loyalty and retention?
The right product line-up has a key role to play
“A wide-ranging product line-up is vital. Brands need a combination of
entry level, mass and high-end products. They also need to pay proper
attention to customer relationship management. Finally, luxury brands must
acknowledge the impact of Corporate Social Responsibility (CSR) on brand
value. This is a valid source of intangible competitive advantage, and can
help to establish recognition amongst consumers.”
Interest and convenience
“The keys will be: launching new products, high-quality service, and reliable
and convenient dealerships.”
Luxury service levels
“You’ve got to offer customers an exclusive high-end service and effective
relationship management services.”
Address rational and emotional needs
“Most Chinese consumers are still motivated to demonstrate social status
and success by consuming premium brands. The pricing of luxury goods
must therefore reflect the brand’s luxury perception and feeling. Brands must
also establish their position and status with the market – perhaps through
recruiting well-known celebrities or opinion leaders. And finally, the product
itself must serve multiple functions. It must satisfy consumers’ rational and
emotional needs.”
Be unique and high-end, but also competitive
“The keys to attracting more high-end customers are: having a unique brand
image, competitive pricing, and high-end technology.”
Deliver premium innovation
“Product innovation is of course important: you’ve got to have a market-
leading product. Then you need to have a prestigious brand and offer
customers a premium experience.”
AL:
SC:
DF:
AL:
SC:
DF:

16. 2928
TNS: What are the luxury brands with
a DNA closest to your own?
LV and Apple
“LV, because it’s the root of premium and luxury goods from Europe. LV combines
genuine products, legacy and fashion in their brand. Apple, because of the iPhone,
their cutting-edge technology, and their new product concepts. They have left
competitors behind with their new lifestyle products.”
IWC, Zegna, Rimowa
“IWC for its unique and leading technology. Their watches are low-key yet full of
substance. Zegna for its sporty luxury feeling in menswear – it’s a kind of celebrity
athletic. And finally, Rimowa suitcases for their renowned workmanship, and trendy
design. All three brands reflect Acura characteristics: leading technology, unaggressive,
sporty, dynamic, old money.”
Apple, Park Hyatt, Prada
“Firstly, I’d have to say Apple, for consistently offering customers user-friendly
technology, outstanding design and interactive experiences. The lesson to learn from
Apple is never to stop innovating and to remain future-focused. These values are
quite similar to Audi’s Vorsprung Durch Technic. Then I’d have to say the Park Hyatt
for its level of personalised service and focus on progress. In these respects they are
streets ahead of the competition. What’s more, their version of luxury feels especially
contemporary due to design by famous architects and interior designers. Finally, I’d
choose Prada, which has similarly cutting-edge styling and is capable of setting new
trends with sophisticated design, production techniques and quality.”
AL:
SC:
DF:

17. 3130
Michael Griffiths
Global Expert,
Cultural Insight & Strategy,
TNS China
Luxury is
TNS’s Michael B. Griffiths explains evolving attitudes to
luxury in China
Luxury brands have become mass in China. Once upon a time
everyone wanted to own a Hugo Boss product. Then it was Rolex,
Burberry, LV and the rest. Today, China’s shopping malls are
saturated with luxury brand advertising and the average Zhou can
fluently discuss the relative attributes of different label offerings.
Today, merely recognising a luxury brand is enough to partake in
its narrative and luxury consumption has become commonplace.
As a result, luxury can no longer be defined simply by exclusivity.
Consumers are demanding an innovative, new approach to social
distinction.
Luxury in China is no longer simply about the logic of possession
and status but about what the consumer stands for. China will still
have enough newly rich consumers to fuel luxury as we know it for
some time, but there is already evidence that, in the future, beautiful
will always win out over big.
A powerful display of discretion
Luxury in China today is increasingly about
the ability to differentiate within categories,
to mix styles and blend collections, and
to fashion personalised statements from
the range of available materials. Of course
this has led to some dubious experiments
– like the black Lamborghini with the
Batman figurine stuck on its bonnet down
by the Bund – but in the future, personal
statements will be increasingly understated.
Less will be more. We are already seeing
luxury brands downplay the iconography
that made them successful, with discreet
patterns and small logos have become
vogue. The success of independent luxury
brands and handcrafted products are
further evidence that consumers want
luxury to return to what it was always
supposed to be – niche, special.
In other ways too, luxury has become
about the person so much as the product
or brand. The hotel industry has discovered
luxury as experience – about the journey
so much as the destination. The same
will be true of automotive, which will
become less about the car than the drive.
Increasing numbers of luxury customers say
they buy luxury goods as a way to reward
themselves, rather than for ostentatious
reasons.
Of course, consumers have always taken
great pains to deflect any suggestion of
ostentation by claiming that this form of
consumption was appropriate or even
necessary for their position or title. Their
mass

18. 3332
need has been to avoid being judged crass,
uncultured, venal or corrupt, yet within
these parameters, ostentation has been
proudly on display. Such is the nature of
consumerism though, that as soon as
ostentation has ceased being a taboo-
transgression, it has also ceased to be
desirable.
Luxury in China today, is increasingly about
vision: not just about the recognition of
prestigious marks but the right to appraise
objects and vistas as worthy. It is not about
seeing so much as being seen to see, with
a gaze which demonstrates that you have
a total mastery of your environment. The
explosive rise in high-end camera purchase
and photography is a case in point: the
apparatus functions primarily to frame
subjectivity.
Details are another case in point: the
demise of the luxury overstatement is
paralleled by a new appreciation for
intricate design and striking, artistic
simplicity. In luxury auto, consumers now
find perfect stitching and body-work lines
as appealing as big engines and over-sized
chassis.
The tuhao generation
Clues to the overall macro-trends
driving luxury in China can be found in
everyday speech and culture. One of the
most popular terms to emerge into the
mainstream during 2013 was ‘土豪tu3hao2’.
Coined for the gold version of the iPhone
5s smartphone, ’tuhao’ is comprised of two
characters: ’土tu3’ meaning soil or earth, ’
豪hao2’ meaning grandeur. The term has
become a parody for fusions of rustic roots
with crass ambitions and gaudy expressions.
It was a predictable irony that brands would
release ‘tuhao’ versions of their existing
products and that these would perform
well as consumers rushed to buy into the
latest craze. More significant, however, is
everything else ’tuhao’ demonstrates about
the evolution of luxury in China.
The Chinese have always had derogatory
terms for the rich and unsophisticated.
‘Tuhao’, however, evinces a new capacity
for Chinese to laugh at themselves – to
not take themselves so seriously – because
the term parodies not only shamelessly
extravagant luxury but also the social
discourse which made those forms of luxury
desirable in the first place. For consumers
in China’s higher-tier cities at least, ’tuhao’
represents a tongue-in-cheek satire of
China’s breakneck pursuit of material
affluence in the get-rich-quick era. Usage
of the term doubtless involves disdain for
lower-tier city nouveau-riche types, yet
there is also an element of fond nostalgia
for the days when big bars of gold were
also all that higher-tier city consumers
aspired to.
The emergence of ’tuhao’ as a popular
meme represents the morphing of the
prototypical Confucian ego from status-
oriented functionalism towards new post-
or counter-materialist ideals. It heralds a
future where face-driven materialism will be
less obviously paramount in consumption.
Related trends can be seen in voluntarism,
charity and philanthropy, in CSR and
environmentalism, in the pursuit of natural
ideals through ’authentic’ rural tourism, in
press stories of Chinese families concerned
that the next generation doesn’t have
the appropriate ’spirit’ regarding wealth,
and in online scorn for the way that gross
inequalities of wealth have loaded China’s
already imbalanced gender-ratio dynamics
in favour of ’gold-digging’ young women
who date big-spending ‘sugar-daddies’
twice their age.
Here are three things brands can do to
stake a claim in this evolving, complex
future for luxury in China:
In luxury auto, consumers
now find perfect stitching
and body-work lines as
appealing as big engines
and over-sized chassis.

19. 3534
Give it a story
In the future, meaningfulness will
matter more than the size of the
statement. Consumers will crave a story
to ground their personal appreciation
of the brand in its source. This means
that authenticity, heritage, provenance
and uniqueness will be absolutely key
– but they are not only defined against
counterfeits. Brands should find ways
to bring consumers into the brand
narrative, since authenticity is ultimately
a discourse of authorship.
Digital forums are amongst the most
obvious channels for achieving this,
but it could equally be about group
membership and shared activities
around the brand. In Beijing, we found
consumers who had set up a BMW
driver’s association. Membership wasn’t
just about VIP ownership but about
car sharing and weekend drives to
Inner Mongolia. The group would visit
orphanages and retirement houses,
and even drove to the earthquake site
in Sichuan to visit victims who are still
rebuilding their lives, since this gave
their lives significance. The association
wasn’t about BMW as we know it:
consumers had written themselves
and their ideals into the brand and
fashioned the brand meaning anew.
Give it an ethos
In the future, luxury will say more about
what you do with your money than
how much you have. The difference
between ’big’ and ’great is one of social
and moral ideals, and ethics are back in
vogue in China in a way that plays well
with the state’s latest crackdown on
excessive gifting and banqueting. Luxury
brands can stay ahead of these evolving
consumer sensibilities by emphasising
morality and sacrifice as much as elitism.
Brands that can weave an ethical story into
their production, perhaps by employing
impoverished groups, and demonstrate real
social feedback from their profits, stand to
be particularly successful. Give consumers
a chance to do good at the same time as
making luxury purchases, and sales should
rocket since this resolves any residual moral
tensions regarding self-seeking behaviour.
The purchase is legitimate due to its
contribution to society.
Make it Chinese
Consumers overwhelmingly seem to believe
luxury is European in origin and have very
specific ideas about luxury provenance:
Switzerland for watches, Germany for cars,
Italy for shoes. China’s romance with its
‘Occidental Other’ is evolving, however,
and in the future China will not necessarily
think of its own products and designs as
cheap or inferior. China pride has been a
factor in luxury consumption for a while
now and consumers of the future will
appreciate overseas players who find
ways to pay homage to Chinese cultural
status. Shanghai Tang is a great example
of a luxury brand that has harnessed
traditional Chinese aesthetics to forge a
delicate balance between mythical past and
modern, globalising future. Overseas brands
seeking an edge in the China market can do
likewise by making use of Chinese cultural
resources in design and marketing, perhaps
not as part of their core brand identity but
tactically, for specialised product lines or
during important seasons. As the success
of Shanghai Tang demonstrates, branding
with Chinese characteristics increasingly
appeals to consumers in overseas Western
markets too.
Conclusion
In the final analysis, Chinese consumers’
expectations of luxury are evolving. Luxury
was a category with its roots in the rigid
structure of power in the Confucian family,
in anxieties about China’s role in the
world during the “Open Door” era, and
in the status-seeking behaviour that new
money brings. Now that a certain extent of
material affluence has been sustained over
time, the conception of luxury is expanding
to include all manner of more “spiritual”
pursuits.
As we usher in the year of the horse,
the logic of possession, display and
covetousness increasingly appears vulgar
and common. Luxury market watchers can
therefore expect to see the main areas of
growth come in high-end, experience-
oriented products that provide consumers
greater scope for personal choice and
expression; and just as significantly, brands
which offer consumers the opportunity to
indulge the pursuit of ’higher’ moral virtues.

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Christina Leung (CL)
Marketing Director,
Champagne, wine and
other spirits, LVMH
Paul Pairet (PP)
Founder, Partner and Chef
de Cuisine Mr & Mrs Bund,
Ultraviolet
Sandra Cheng (SC)
Marketing Director,
Benefit cosmetics
TNS: How do you capture the attention
of high-end consumers in China?
The price tag matters
“Be the most expensive, obviously. This goes a long way by itself. But there
are other factors, such as design by leading designers, production with rare
materials, or quality built up over time by artisans etc. All this works. And
then you’ve got endorsement by the celebrities that high-end customers look
up to, such as Jack Ma (Founder of Alibaba) and Eric Li (CEO of Baidu).”
Be specialist and creative
“You’ve got to have a product with a story to tell, and not just a marketing
story built to dress-up a product. Your creativity must be genuinely original,
as opposed to just drifting along with other people’s ideas. And you’ve got to
be niche, because the real high-end is really specialist.”
Enlist advocates
“For me, peer group recommendation is key. Great PR and advertising is the
start but then it’s about consumers’ word-of-mouth.”
When asking ourselves
what role luxury plays
for Chinese auto buyers,
it’s worth asking how
those consumers express
themselves through luxury
brands in other areas of
life. We brought together
three of the country’s top
luxury marketers for a
unique perspective on what
motivates high-net worth
consumers – and how auto
brands can align themselves
with these needs.
CL:
PP:
SC:
Luxury brands in China:
view
cross-
category
The

21. 3938
TNS: What’s the key to brand loyalty
amongst luxury consumers?
TNS: Can you define what luxury
means to you?
“Luxury is at hand, but difficult to catch and impossible to retain. It passes, it
moves, it lives, it is a feeling, an emotion: An exclusive experience that shall
imprint the memory. Emotion is the quintessence of luxury and Memory its
barometer.”
“Luxury to me is a complex fusion of top quality, trendy design, premium
cost, and overall rarity.”
Haute Couture service
“Haute couture is tailor made only for you. From fashion, to travel, to home
design and cars, there is only one piece in the world for you, the only you.
The same principle applies to service and customers relationships. One-to-one
service can forge tangible and intangible bonds between the brand and the
customer.”
Make brand memories
“Quality of product and service is of course paramount. Being the best at
something marks you out above all-rounders. And you’ve got to create lasting
impressions. Memory is the best measure of value.”
Maintain momentum
“To retain high-end customers we need to maintain our share-of-voice in the
market, release exciting news every year, and deliver unique shopping and/or
after-sales services”
“Berluti, Ferrari and Bvlgari vs Hennessy. All these brands have heritage, savoir faire,
artistic qualities, and a timeless nature.”
“The brands I want mine to share their DNA with are Hermes, for its atemporality; Fred
and Fari (FF) for their unconventional futuristic creative spin on communication; and
Aston Martin for its understated sexiness.”
“Diesel; smart; Apple.”
* These are the views of the interviewees and do not necessarily reflect those of their employer.
** Image of Chef Paul Pairet by Ball Chen of SOB
TNS: What luxury brands share
the same DNA as your own?
CL:
PP:
SC:
CL:
PP:
SC:
“Timelessness, a piece of art, the ultimate savoir faire. Let time penetrate
what the present cannot.”
CL:
PP:
SC:

22. 4140
I hope you have enjoyed reading our report on China’s luxury auto
market. With our many different perspectives and areas of expertise,
I hope that we’ve helped to reveal the secrets of a sector that is
becoming increasingly challenging but remains undeniably exciting.
Despite the recent sales drop following the state’s crackdown
on excessive gifting, the trend ‘Luxury for All’ continues. With
the accumulation of wealth, more and more Chinese consumers,
younger ones in particular, can afford to make statements through
luxury products, and auto is no exception. The luxury market will
become fragmented down the road, since more buyers will choose
vehicles based on their lifestyle preferences, instead of merely on
business needs. Brands have responded with broader product
offerings including SUVs and Cross-overs that meet their varied
needs and a retail network better aligned to their target customers.
Gary WU
Head of Automotive, TNS China
skilled
A promising
road ahead:
drivers needed
Luxury buyers are able to evolve faster
than most. They travel and shop frequently
outside China; they can access information
more freely, and have become increasingly
mature and sophisticated. We have
observed many consumers move from overt
to smart luxury, and even to experiential
luxury, shifting their emphases from flashy
designs and logos to finer details and
services. Customisation and personalisation
are increasingly popular.
Brands might find the prospect of enlarging
their customer base and expanding their
product portfolio irresistible, yet careful
planning is increasingly required to address
the threat of brand dilution. “Always sell
one car less than what the market requires”
is certainly a smart strategy.
Consumers are emotional, luxury buyers
included; but they are also rational. As
a matter of fact, consumers are quite
predictable, provided we understand the
driving forces that shape their behavior. We
at TNS are here to help you gain the insights
to steer your growth in this promising yet
challenging market.

23. 4342
TNS is the world's leading provider of automotive marketing information and insights.
Our 800 dedicated consultants around the world are uniquely placed to provide precise
strategic direction: deepening customer relationships, developing new products, targeting
new markets and illuminating the road to growth through the entire customer-brand
relationship journey.
You can read more of our thinking on our blog at:
http://blogs.tnsglobal.com/tns_automotive/
Get in
touch:
If you would like to
discuss any aspect of
the automotive industry,
please do get in touch
with our experts:
Gary Wu
Head of Automotive, TNS China
Gary.Wu@tnsglobal.com
+86 21 2310 0905
Guillaume Saint
Managing Director
Automotive Practice APAC
Guillaume.Saint@tnsglobal.com
+86 21 2310 0870
Subhashish Dasgupta
Director - South East Asia, Automotive
Subhashish.Dasgupta@tnsglobal.com
+65 6597 7371
Remy Pothet
Automotive Global Sector Head
Remy.Pothet@tnsglobal.com
+33 1 40 92 28 02
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