Authorized vendors face slump in spending

Chinese customers are spending less money at auto dealerships mainly as a result of government policies, according to a recent JD Power survey.

The study found that Chinese spending by car owners at authorized stores in 2014 slumped to 3,480 yuan ($560) from 4,288 yuan in the luxury segment and to 1,558 yuan from 1,710 yuan in the volume brand segment, the lowest level since 2012.

The findings are based on face-to-face interviews with 17,976 car owners who purchased their vehicles between October 2011 and May 2014. The study was conducted from October 2014 to May 2015 in 51 major cities in China.

JD Power said the slump is mainly due to government policies targeting the automotive industry.

One such is the Guiding Opinions on the Transformation and Upgrading of the Automobile Service Industry for Service Quality Improvement regulation. Enacted in September 2014, it encourages free circulation of spare parts among authorized and unauthorized vendors.

Spare parts were previously only available at automakers' authorized stores in China and customers had long complained about their exorbitant prices.

Another is the Provisions on the Liability for the Repair, Replacement and Return of Domestic-Use Automobile Products.

This regulation, which took effect on Oct 1, 2013, requires that new vehicles be guaranteed for no less than three years or 60,000 kilometers.

Despite the four-year low in spending at authorized dealerships, there is an upward trend in the volume of the after-sales service market - including revenue from after-sales services and spare parts for maintenance and repairs.

The study said the market grew by 37 billion yuan in 2014. It also found that businesses that provide customers with a better service experience see rapid growth in their revenue.

"Improving service quality not only drives additional revenue growth, but it also improves customer loyalty," said Xie Juan, a senior research manager at JD Power.

Statistics show that authorized dealerships that perform above the industry average saw their revenue grow nearly 9 percent and had customers return for subsequent services.

The study found that efficient staff, advanced facilities and comfortable lounges are key factors that affect customer satisfaction.

For businesses that are lacking in the first two aspects, an expedient solution, the report suggests, is to offer high-speed Wi-Fi service. The study reveals that customers tend to be more satisfied when they have access to the Internet but are less satisfied when the service is slow.

"Authorized dealers really need to understand their customers' emotional needs and deliver customer-oriented quality service," Xie said.

"This strategy can be particularly effective in the intensely competitive automotive industry in China."