A small but growing slice of wealthy Chinese citizens are seeking enjoyment in off-roading much as other enthusiasts around the world have. These well-to-do off-roaders usually own two or more cars and use their 4WD vehicles on the weekend for leisure.
Chinese government statistics suggest that the number of passenger cars on the road at the end of 2007 numbered about 32 million, and according to industry data experts, about 6 million new domestically produced passenger vehicles will be sold in China in 2008.
There is also an increasing number of SUVs in the mix of new vehicles delivered; more than 350,000 in 2007, which is an increase of 50% over 2006. Figures for the first quarter of 2008 signal that the growth is still strong with about 40% more SUVs sold compared to the same period in 2007. Imports of vehicles are strong too, with more than 280,000 vehicles coming into China in 2007, 50% of which were SUVs. The first half of 2008 saw total imports up 52%, and the SUV share of this figure had increased to 57%.
In a word, the SUV, including all 4x4 variants, is becoming more and more popular, even though the price of gasoline is over $3.20, high by Chinese standards, at the time of writing.
Chinese Off-road Shops
In March 2007, a survey of tuning shops in China concluded that there were conservatively about 400 4x4 modification shops nationwide. In the same month, a well-known tuning Internet site, www.modi-auto.com, had a total of 315 tuning shops of all kinds listed on its website, but a poll of the regions covered by modi-auto.com concluded that they did not have total comprehensive coverage of the China market.
Today, 18 months later, the same site has about 800 tuning shops listed, and there is a lot of other anecdotal evidence that suggests the growth in the number of tuning shops in China in the last year and a half has been significant. The 4x4 aftermarket industry participants have attributed the growth mainly to an increase in the number of vehicle models that can be modified, increasing numbers of aftermarket products coming into the market, and growth in the total car parc in China.
Off-road tuning shops are popular in China, like this one in Chengdu.
Most Popular Vehicles for Modification
There are some regional preferences when it comes to which vehicles are most commonly modified, but the vehicles that are most commonly mentioned right throughout China are the Jeep Cherokee and Grand Cherokee, the Toyota Land Cruiser 80, 100, 120, and Prado, Nissan Patrol, Mitsubishi Pajero and comparatively fewer Land Rovers.
At the high-end of the market are the HUMMER, Mercedes G Wagen, Lexus, Toyota FJ Cruiser, Audi and Porsche. Basically all of the popular vehicles are gasoline-engined. Diesel 4x4s are almost non-existent. The engine sizes used in the Toyota range go all the way from 2.7L four-cylinder to 4.7L V8. The older Jeep Cherokee models have 2.5L, 2.7L and 4.0L engines.
4x4 Modification Markets
When asked about the regions that they were seeing the most product sold into, the respondents all mentioned the western and northern areas of China as being the key markets. The western and northern regions of China have wide open spaces and many unsealed roads, especially in the rural areas. More than half of those questioned also added that the southern provinces are a good market, but one that has some different features when compared to the wilderness regions.
The heavily populated eastern seaboard of China has many large cities and does not present many real off-road opportunities, and so no one regarded this portion of the country as being a prime 4WD parts market.
Suspension and Lift Kits a Popular Choice
Shops, distributors and media professionals, when asked about the popularity of suspension modifications and lift kits, opined that suspension upgrades are one of the most common forms of customization made to modified vehicles in China. Estimates for the proportion of modified vehicles having upgraded suspension ranged from "two-thirds" to "80%."
Those having some form of lift kit installed are a sub-set of this number and estimates differ from region to region and the specialty of the expert interviewed, but the general consensus is that about one-third of those who have suspension modifications also have some form of lift kit installed, either with the initial suspension upgrade or at a later date.
This Jeep Cherokee rear suspension has a lift kit that incorporates three imported shock absorbers and imported springs.
What Lift Kit Products are Popular?
Products from the United States and Australia, including OME, Rancho, Pro-Comp, Tough Dog, TJM and Skyjacker, are the most popular, taking most of the imported parts market. Those polled all emphasized that the most important components in any lift package are the imported shock absorbers and springs. Several industry participants made the observation that this is because the customer recognizes that these components are technically difficult to make properly in China and are high-quality.
The same experts also spoke of other lift kit components, such as cross members, spacers and control arms, being regarded as low-tech and this being an area where local Chinese manufacturers can achieve acceptable quality in these parts. These parts are more likely to be made locally and packaged with imported springs and shocks as a single kit.
The reasons behind this are that many imported kits do not fit the locally available vehicles, and even if they do, the components besides shock absorbers and springs are exorbitantly expensive. The consumer may see no merit in using the imported components besides the springs and shocks, especially considering that these products are seen as low-tech items and there is no perceived disadvantage in using locally made cross members, spacers, control arms, etc.
Other motivations for shops to push these locally made kit components is that the mark-ups on them are larger than on the imported ones, they can fit a wider variety of vehicles and the inventory control advantages are considerable.
Mixing and Matching to Customers Needs
The Jeep Grand Cherokee is a case in point. This vehicle is now fully imported, but there is no lift kit readily available in China for this vehicle so the better, more technically adept tuning shops may put together a package of various brands of springs, shocks and other components to make up a lift kit package for customers that ask for it.
One other reason for mixing brands on one vehicle is that many of the vehicles in China are Japanese models that few U.S. companies have springs for, so it is not uncommon to see packages where a U.S. shock absorber is matched to an Australian spring. This is because the Japanese models available in China and Australia are identical or very similar, so Australian spring manufacturers have the off-the-shelf product lines for the vehicles in the Chinese market.
Mixing and matching lift kit products, as in this example of an American company's shocks with an Australian company's springs, is often done in China in response to customer needs.
"Soft-Roaders"
The northern and western regions of China are good markets for lift kit products that make 4-wheel off-roading easier, but those interviewed in the southern areas also mentioned another important consumer group, that of the "soft-roaders."
These high-end users of vehicles such as the Porsche Cayenne and Lexus SUV who want a couple of inches of lift are more likely to have an airbag-type suspension or some other similar type product installed if they have any lift kit at all. These units can be remotely controlled from within the cabin. When not in use, they do not compromise the on-road handling of these vehicles by much. These users can and do pay for the best imported brands to be fitted. These vehicles tend to be new.
Regular Users vs. Hardcore Users
At the other end of the scale are the hardcore 4x4 lovers who might not be the wealthiest of 4x4 owners, but they have a lot of knowledge about the lift kit products that are available in the market and their usefulness in going off-road. This group of consumers buys the imported products that work well in local conditions, but otherwise is quite happy to use cheaper, locally made products and tends to use secondhand vehicles, typically the Land Cruiser 80 or Jeep Cherokee.
However, the bulk of the lift kit users are the owners of an American- or Japanese-branded 4x4 that has been modified for off-road use on the weekends or for occasional long trips with other members of an off-road club. These users will tend to buy on brand, not on price, and the vehicle that they start with may be new when first modified. According to all industry experts spoken to, these owners are the mainstay of the aftermarket 4WD market.
A journalist familiar with the off-road scene noted that those who owned a 4x4 as a status symbol would only buy a branded product, but may not necessarily use the vehicle in hardcore off-road situations. Those who wanted a practical vehicle with genuine off-road ability, however, would make a purchasing decision based on their own experience and that of their friends and would get the best combination available, regardless of brand or price.
Earlier models of the Land Cruiser and the Jeep Cherokee are popular vehicles among the hard core off-roaders in China, most of whom are users of lift kits incorporating imported components.
How Much Lift?
The most popular lift is between two to three inches, though some shops advertise up to 6-inch lift for some types of Jeep. This amount of lift allows an increase in off-road ability, as well as allowing the option of having heavy, suspension-settling aftermarket products, such as winches and bullbars, or oversize wheels and tires.
The local police are not familiar with products such as lift kits, so it is possible for the owner to explain away a certain amount of lift as being "standard" if they are pulled over. But if the lift is too ostentatious, it may be difficult to explain away. At inspection time in large cities, it can be a problem, too, although past interviews with the Chinese 4x4 community highlighted the fact that the rural areas, or certain understanding inspection officials, may be lenient if you have a good "relationship" with them. Shops will usually be able to provide a registration service for their regular customers that takes away the pain of having to go through the process yourself.
What Are the Prices Like?
A fully imported lift kit will cost anything from 5,000 RMB to 20,000 RMB (US $729 to US $2,900). One website for a shop in Guangdong province even had a 38,000 RMB (US $5,550) kit for a HUMMER H3 available, though this would have to be special-ordered. Installation in many shops is free because of the low cost of labor. The margin is made on the parts themselves, with no separate labor charge. If you are a Chinese consumer purchasing high-quality, imported brand parts, the likelihood is that you will never have to pay for the labor that installs them, at least not in an overt manner.
Information about new products in the Internet era comes from many different directions. China is highly connected, with more than 200 million Internet users, 80% of whom have broadband. The group that is able to afford off-roading as a weekend leisure activity will be among the more connected.
A typical scenario is that a customer who has been overseas on business and picked up a 4x4 magazine while outside the country will see a product or brand that they like, Google it and ask their shop to look into getting it. The shop will use the Internet to research the product, and if there is a local supplier, the shop will purchase through them. If there is no local supplier, they will contact the manufacturer directly and buy enough of the product to satisfy their customer, but will also evaluate the product to see if this may be a good line to handle regularly. Word of mouth between customers is encouraged by shops, which usually have an off-road club and hold regular outings, dinners and trips. If there is follow-up demand, the shop may open up negotiations with the manufacturer or supplier to become a local distributor or sole agent in their area of China.
How to Market Your Product
There are a range of magazines that specialize in the aftermarket and have a B2B audience. One of them is Option & 4WD, whose Editor-in-Chief, Jeson Chen, had the following advice on getting your product known in the market.
"Brand promotion is very important, as is finding a sales channel that suits your product. The market is becoming a little more crowded these days so you have to be able to clearly explain what is unique about your product when compared with the players already out there. Even though the consumer is willing to pay for high-end products, you have to have a pricing strategy that makes sense in the market."
Other comments about promotion included sponsoring Chinese off-road motorsports events, approaching clubs and attending trade shows.
Distribution
Many shops start off as retail establishments and move on to become distributors. The distributors of the most popular brands of imported lift kits are mostly in this category. Two of these importers and distributors are based in Shenzhen in Guangdong Province, next door to Hong Kong.
Shenzhen Cross Country 4WD Industry Co., Ltd is the sole agent for China for two brands of suspension and lift kits from Australia—TJM and Tough Dog—and distributes them throughout their own distribution network in China. They also use Rancho shocks matched to Lovells springs in some applications, and used to be the sole distributor for Rancho. These days Rancho has its own distribution network and sales in China.
Also in Shenzhen is Power Controller, the local distributor for Pro Comp and Skyjacker suspension and lift kits. Beijing Off-roader 4WD Club, located on the outskirts of Beijing in northeastern China, is the sole distributor for Old Man Emu, a brand under the ARB umbrella. (Contact details for the three establishments just mentioned are in the China Market Report, available at www.sema.org/international).
What Comes Next?
Once a customer has installed a lift kit, what other products are they likely to install? There were many answers to this question and were varied because of the subjective nature of this question when applied to the 4x4 market. It is all a matter of personal choice. Nevertheless, the most commonly quoted items were lights, wheels and tires, bull bars and winches.
For more information on the Chinese specialty equipment Market, SEMA has published an updated China Market Report available online at www.sema.org/international.
