Author: Michelin

Even with 24-hour 5G surfing, some concepts still catch people off guard, like “camping” that’s prevalent on social media, or “MPV” that’s currently trending in the automotive industry.

If we were to choose a hot topic in the automotive industry during this slow-paced spring and summer due to the pandemic, it would undoubtedly be MPVs. A hot search suddenly appeared on Weibo a few days ago, titled “China’s MPV eruption year.”

In the eyes of many Chinese people, MPVs are still synonymous with “nanny cars” or “mini buses.” They may even be more familiar with the combination of letters “MVP.” However, since the introduction of the “three-child policy,” MPVs have quickly gained popularity, like a “three-child concept stock” that’s gone up in value. From the sought-after “internet-famous cars” like the Saiana and the LanTu, to the most recent releases of the Dreamer and the DENZA D9, and the upcoming MPVs from Red Flag, JiKe, and Changan, the MPV market in China has never been so buzzy.

This once lukewarm field has suddenly become a new arena for carmakers to compete, and it seems like one would miss out on it if they arrived too late. Why has MPV become the darling of the car industry overnight? Who is buying these surging MPV models?

“Three-child MPV,” a genuine need or a false demand?

It’s hard to ignore the word “three-child” when discussing the sudden rise of MPVs. Having more children or family members means a need for more space and seats in an MPV seems like the obvious solution.

This is not the first time MPVs have been in demand. The last “MPV eruption” in the Chinese market can be traced back to 2016 when MPV sales remained high for several years, selling nearly 2.5 million units annually. It so happened that in 2015-2016, the “two-child policy” was implemented nationwide. In China, it seems like MPVs will always be tied to “children.”

However, MPV sales suffered a serious setback in 2017, plummeting to only 1.05 million units in 2021, less than half of the sales in 2016. We had once thought 2017 would mark the beginning of MPV’s explosive growth, but in hindsight, it was the peak.

The lessons of the sharp decline in sales of the previous models tell us that simply treating “children” as the cure-all for MPVs is obviously not the way to go. Not to mention how many families actually have three children, for most families with one or two children, the ideal solution is a large SUV like the ONE that caters specifically to dads, which MPVs competing in the market need something that neither large SUVs nor traditional joint venture brand MPVs can offer.

Has the mid-to-high end MPV suddenly become the new darling of car makers?

The sudden appearance of MPV models has given people the impression that the domestic MPV market has caught fire. All these new products, without exception, are aimed at the mid-to-high-end market of 300,000-400,000 yuan. Was this a coincidence?

As mentioned earlier, despite experiencing a few years of decline from the peak of the domestic MPV market in 2016 to the bottom last year, carmakers have seen an opportunity.

On the one hand, there is an increase in domestic MPV household demand.

I came across an internal survey report from 20 years ago, just as the Odyssey was entering the Chinese market. At that time, nearly 100% of MPV users in China used it for business purposes, with weekend and holiday family trips being a bonus.

With the improvement of the economic level, the proportion of MPV household use began to increase around 2013-2014. The Odyssey and GL8 also launched products that are suitable for both business and household use. In recent years, with the improvement of the economic level, this significant tilt towards household use has become even more apparent. With limited commercial market size, only a large base of household market can ignite the sales of MPVs. Therefore, whether it is the “Voyah Dream Family”, “DENZA D9”, or “Guangqi M8”, they all focus on household use MPVs.

On the other hand, during the 6 years of sharp decline in sales, domestic mid to low-end MPVs have been difficult to sell, but the impact on the mid to high-end market is not obvious. In the latest MPV sales rankings in April 2022, except for the “national popular car” Wuling Hongguang, which has always been strong, almost all of them are mid-to-high-end models priced between 250,000 and 400,000 yuan. A “China Household MPV Market Insight Report” from iResearch shows that users who are willing to spend more than 200,000 yuan to buy MPVs account for 67.9%, and more than half of them have more than one car in their households.

The increase in household demand and the rise in mid-to-high-end demand also make it easy to understand why MPVs launched recently are targeting the mid-to-high-end market of 300,000 to 400,000 yuan, and even launching top-of-the-line models priced at 600,000 to 700,000 yuan. While fluctuating in this price range, domestic brands still have room to add intelligent software and hardware while ensuring the quality of the product’s interior and exterior and power performance.

And this price range happens to be where the domestic MPV veteran product GL8 has already become popular, and users are more accepting of the price.

If the market demand determines the explosion of mid-to-high-end MPV products, then electrification and intelligent technology have accelerated the entry of domestic independent brands into the battlefield. The high demands for power and chassis comfort brought by the large body size and weight of MPV models in the past have made mid-to-high-end MPVs almost exclusively dominated by joint venture brands. Electrification platforms have lowered the threshold for domestic independent brands to become high-end, and also lowered the threshold for MPV models with even stronger power and better driving experience.

Therefore, as the first shot of the brand in the MPV field, whether for the Landtu or DENZA, choosing to establish a high-end brand positioning through high-profile actions is both reasonable and leaves room for subsequent sinking products.

Who Bought the MPVs?

For household MPVs, the primary reason for choosing to buy one is the need for multi-member travel.Looking through the forums and communities of popular MPV models, “taking care of children” and “having a second child” are the most frequently mentioned reasons for car owners to share. However, children are not the only reason why family users choose MPVs. I asked several MPV owners around me, and the reason they most often cited for choosing to buy an MPV is for the elderly: “Need to take parents out to play”, “Convenient for elderly people to go to the hospital”, and “Elderly people can get on and off the car easily”.

Simply put, “having the old and the young at home” is the main user group for domestic MPVs. According to market research reports by iResearch, users aged between 26-45 account for 85% of MPV car owners, and more than 90% of them are married.

If we talk about MPV models with stronger commercial and nanny car features, such as the Toyota Alphard and Mercedes-Benz V-Class, the probability of the driver driving and the car owner driving is barely 50-50. They have higher requirements for the quality of appearance and interior, as well as the comfort of riding. For mid-to-low-end MPVs priced at 100,000 to 200,000 RMB, if they can meet the basic needs of large space and many seats, they will be considered satisfied. When brands focus on the mid-to-high-end household market priced between 300,000 and 400,000 RMB, they will face difficult-to-meet demands from different users.

For household MPV owners, having many family members can be said to be the main reason they choose to buy an MPV, and more than half of them own more than one car. Therefore, when an MPV is used, the usage rate of driving by themselves or having the third row seat carry things is higher, which creates a different demand for the car.

For example, for car owners with two children, when choosing an MPV, they pay more attention to whether the legroom in the third row is spacious, whether the seats are comfortable, whether the aisle from the second row to the third row is spacious, and even whether there is a child seat interface in the third row. This determines whether it is convenient for them to take two children out.

For users who need to pick up and drop off the elderly, they unanimously mentioned the low ground clearance when getting on and off the car, being able to recline the seat for the elderly to rest, and so on.### Final Words

As I will mostly drive myself, I hope the car has good power and doesn’t feel too sluggish. Since I’ll be traveling with my family, I also want the car to be relatively quiet with less noise. Since I’ve already spent around 300-400 thousand, I hope the interior would not forget the sense of full plastic. In a GeekCar live broadcast on MPV models, a user left a message that he ordered the car to travel short distances with his spouse, and in his opinion, whether the car can show its power is the most important factor…

Regardless of whether 2022 is truly the year of the MPV boom in China, at least the MPV model is considered popular now.

For consumers, fierce competition means more choices, which is, of course, a good thing.

However, when several models with the same price range and same positioning are simultaneously launched, it is inevitable that a battle will occur before snatching up the cake from the well-established joint venture MPV brands in the market. To truly heat up the MPV market, it is necessary to “cross borders” and compete with larger SUV models.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.