MOTOR VEHICLE MARKETING FEATURE. Smaller not bigger is better in auto land

Smaller not bigger is better in auto land

The automotive brands that dominate Singapore are in agreement – smaller cars and not hybrids appear to be the way of the future, and online and experiential advertising are the marketing avenues of choice. Heather Jacobs reports.

Inspired by the James Bond film The Spy Who Loved Me, the world’s first submersible car was on display in Asia for the first time at the 2008 Singapore Motor Show. The sQuba, developed by Switzerland-based Rinspeed, can reach a depth of ten metres and is powered by Lithium-ion batteries meaning there’s no exhaust emissions.

Quirky it may be, but innovative, fuel economical and environmentally friendly cars may prove to be the lifeblood of Singapore’s automobile industry with local distributors showing off their wares at the bi-annual show. Held in the last week of September, it coincides with the Formula One, which has become an important part of the marketing arsenal used to promote cars.

According to figures from the Singapore Motor Traders Association (MTA), Honda is the market leader in Singapore selling 14,987 cars from January to July 2008, followed closely by Toyota with 14,399 new registrations. Rounding out the top five is Mitsubishi with 4,594 new registrations, Nissan with 3,526 and Mercedes-Benz with 2,610 out of a total of 58,913 new registrations, for the first seven months of the year.

Overall, the environment in Singapore is challenging right now for car manufacturers, says Loh Shurn Lin, manager of marketing at Mitsubishi Operations.
“This is due to poor buying sentiments caused by the high petrol and running costs, especially with the ‘sprouting’ of so many Electronic Road Pricing (ERP) gantries, the financial crisis and the reduction in the number of Certificate of Entitlements (COE) by the Land Transport Authority,” Lin says.
“Customers are generally not in the right frame of mind to buy cars as it is not a priority at the moment, even though some of their cars may be four to five-years-old. With the number of COEs reduced, COE prices are expected to rise and this may cause those sitting on the fence to adopt a ‘wait-and-see’ attitude, as many have been used to the relatively low priced COEs for quite some time.”

Despite the heavily regulated and shrinking environment, many automotive companies remain committed to spending on advertising. Ad spend from 1 January to 31 August reached $24 million, according to figures supplied by Nielsen. The top five spenders were Audi, Toyota, Mercedes-Benz, Subaru and BMW. Newspapers attracted the greatest share of advertising dollars, followed by TV, radio, magazines, cinema, posters and the internet.

At Mitsubishi the company is mindful of keeping the branding out there, and this year it has launched a number of marketing initiatives and maintained its levels of advertising spend. According to figures supplied by Nielsen, Mitsubishi spent $1.9m on advertising in the first eight months of the year, with rhe vast majority was in newspapers, TV, radio and magazines.
Lin says digital campaigns are becoming increasingly important as Singaporeans become more internet savvy, with many consumers searching online for information on various car models.
In 2007 Mitsubishi held 10% of the Singapore market with 8,168 passenger cars sold, according to the MTA report.
“Our cars are popular due to its stylish and sporty designs, good performance and its reliable ‘Made-in-Japan’ badging,” Lin says.

Tony Tan, marketing director for Inchcape which represents Toyota, says the company has about a quarter share of the market and continues to be the leading brand among the authorized distributors in the Singapore.
“We have been the market leader for years and will certainly take top spot again this year.  This is a position we intend to keep for a long time,” he says.
In 2007 Toyota/Lexus had 21 per cent of Singapore’s passenger car market, according to MPA data, with 17,121 cars sold.
Toyota has responded to the market challenges in several ways, starting with ensuring it provides a total product package that the customer desires.
“We provide high quality automobiles models complete with a range of features that the customer wants. Toyota has the widest range of vehicles. We ensure that the quality of our sales and service is best in class and we support our brand with attractive and relevant advertising and promotions,” Tan says.
Toyota increased its ad spend in 2008 outlaying $2.54 million from January to August, according to Nielsen. Broken down, newspapers attracted the highest share followed by TV, cinema, magazines and then radio. Toyota also spreads its spend on endorsement and sponsorships, PR, direct marketing and the internet.
“The digital medium is increasingly important, for example we do a lot of e-DM and have product and service websites. However, since Singapore is small geographically, we typically find that customers prefer to come to our showrooms to touch and feel the cars and to inquire about products and services,” Tan says.
“We have two showrooms for Toyota and one for Lexus and this is the primary way they interact with the brand. The other mediums are basically design to support our branding and propositions, and announce programs and promotions to draw them into our showrooms.”

Volkswagen is one  motor vehicle player that has responded to global market demands by using fuel efficient TSI technology in a range of diesel models it launched in Singapore in July. It has also raised its marketing output with campaigns to push the new models.
According to Nielsen, VW spent $988,576 on advertising from January to August this year, with the majority going to newspapers, followed by radio with a small amount spent on internet, cinema and magazines. Achim Glogowski, general manager of marketing communications for VM, says digital campaigns have always been an integral part of VW’s marketing, with new media gaining importance as one of VW’s key communications instruments.
Richard Johnson, the former executive creative director for M&C Saatchi Singapore, who has since set up a new agency called The Gang with VW as its first client, believes generally speaking digital campaigns are too stand-alone as opposed to being part of a bigger path to purchase.
“Online is interesting because although it is rarely the first point of contact for a path to purchase, between seventy to ninety per cent of potential buyers, depending on segment, will seek information online about a prospective purchase. However the information they get can be from any number of worldwide sources, not necessarily one which will push them to the local showroom,” Johnson says. “Ultimately nothing will ever replace the test-drive as the final stage before purchase. All marketing communications therefore have to eventually lead to the test-drive. At present the role of the web isn’t fully integrated enough to reap the benefits of CRM testing of marketing messages and localisation. This will change online delivers more potential buyers to the showroom floor.”
In Singapore, VW only had a 0.99% market share in the passenger vehicle sales in 2007 with 804 cars sold. But this looks set to increase in 2008, with MTA figures showing it has already sold 724 cars.
“VW is the third largest automaker in the world, based on sales figures for the first six months of this year,” Glogowski says.
“Sales in Singapore have also dramatically increased in the last two years, since we took over the dealership. Volkswagen has been in Singapore for about forty years, and it has always been an emotional icon in the minds of the consumers.”

Mavis Toh, manager of marketing for Cycle & Carriage Kia, the distributor for Kia Motors in Singapore, believes more marketing dollars are being thrown at outdoor and non-traditional media as well, not just online.
“However, it is important to note that most car companies are still reluctant to totally forgo their presence in traditional media, especially press, which has worked for years and which everybody else is in,” Toh says.
“Therefore, online and other non-traditional media are more of a supplementary media. Digital campaigns for consumer interaction are important, as buying patterns have changed largely with internet and search engines becoming the first media consumers turn to actively seek out information.”
Kia holds three percent of the Singapore market with 2,451 cars sold in 2007, giving it a 3%  market share, according to MTA data. In the first seven months of 2008 it had made 1,189 sales making it Singapore’s 11th top company.
Toh agrees that there has been a litany of bad news in the automotive industry lately - rising petrol prices, impending inflation which affects consumer buying sentiments of big ticket items, as well as more ERP gantries causing cost of car maintenance to increase and the reduction of COE quotas, which inevitably means rises in COE premiums.
Kia is tackling these challenges with a brand campaign titled “We’re there”, which launched in September and aims to inform and educate the public about Kia's achievements in design, innovation and safety.
The car manufacturer has maintained its ad spend over the past two years and according to Nielsen, it spent $1.19 million until the end of August, with the bulk going to newspapers, followed by radio, posters, magazines and then the internet. 
“While there have been vast improvements in product quality and design of Kia cars, improvements in customer perception has not matched it – this means that consumers perceive Kia cars to have improved over the years, but not enough to do the brand justice,” Toh says.
“We believe this branding campaign will help our customers get to know Kia better, and move in the same speed and direction as Kia Motors.”
Toh believes Kia cars are getting more and more accepted by the public as an ‘I bought it because I like it’, instead of ‘it’s the only car I can afford’. However its image differs in other markets as Singaporeans, to a certain extent, still feel that Korean products are inferior to Japanese ones, though that is slowly changing too.
“In Europe and the US, Kia cars have been very well received, even though the target market is perceived to be even more discerning than Singaporeans. In certain markets, for example Chile, Kia is the top-selling car brand, beating your popular Toyota and Honda, etc,” she says.

The Gang’s Johnson is one automotive adman who expects cars in Singapore to become more compact. For example the VW Tiguan, which is the baby brother to the Toureg, is proving to be a huge success and so is the VW Touran, a compact SUV. “This appears to be less about the morality of owning a large, thirsty vehicle, than it is about the simple practicality of driving on Singapore’s slowly increasingly congested roads. And more importantly the tax concessions and fuel savings from smaller engines,” Johnson says. “This naturally is going to see more popularity in smaller engines but more powerful engines such as the TSI, which gives more power but lower fuel consumption.”

Johnson says on paper you’d expect hybrids to be a huge success in Singapore due to the stop/start nature of driving on its roads. Other benefits include the fact that they use less petrol and although more expensive, qualify for a 40 per cent rebate on the Additional Registration Fee (ARF). Ironically, this rebate at purchase makes hybrid ownership less attractive. He puts the hybrids lack of popularity down to legislation above other factors, such as battery replacement and kerb weight.

“Why? Because the government give you a tax rebate when you purchase a hybrid they also give you less money for the ‘scrap value’ of the car upon deregistration. All this seams fair, but… a 1.3-litre hybrid car even after rebate still cost pretty much the same as a 2-litre conventional car. However when you deregister a hybrid the government gives you less of the ARF back, so the depreciation rate of a hybrid is steeper than a conventional car making it less financially astute,” Johnson says.

Legislation also plays a part in the third category - diesels.

“Road tax for diesels, even after recent revisions, is still 2.7 times higher year-on-year compared with gasoline cars. Future legislative changes to make diesel cars more competitively taxed could make the diesel option a significantly competitive threat to hybrids, if only on fuel economy and running costs,” Johnson says. “There are of course other types of propulsion out there but they would require some major infrastructure investment throughout Singapore to make them viable.”

Looking forward, Toyota’s Tan sums up the outlook for Singapore’s car industry as challenging, but positive.
“Singaporeans aspire to own cars and they will always seek out newer and better options, which Toyota is always ready to provide. The recent market declines we view are relatively short-term and the market should rebound nicely in 2010 and onwards,” Tan says.

Johnson states that with 74,000 new vehicles registered in Singapore each year, Singapore’s vehicle numbers are at around half a million. The population however is set to expand to 10 million in the near future, which means owning a vehicle will eventually become the preserve of the rich.

“The result is sales of lower-market cars will drop off and competition in the premium segment will increase. I’m especially interested in seeing what happens to Audi’s market share. In my view they’ve got a product, which is finally superior to the competition and their marketing strategy involving big events and a few large outdoor site deservers to work,” he says.

Furthermore, if the racetrack at Changi gets completed, Johnson expects to see more specialised performance cars entering Singapore and an increase in aftermarket upgrades.

“A lowering of road tax in favour of personal ownership of diesel cars will prove a very interesting marketing area to turnaround present perception of this category,” he says.
Mitsubishi’s Lin is confident cars will continue to be a sought-after "C" out of the five Cs which Singaporeans yearn and strive for, sitting alongside cash, condominiums, credit cards and country clubs. 
“So even though the current situation seems gloomy, cars will still have a place in the hearts and minds of many Singaporeans. Mid-to-long term wise, I remain optimistic,” she says.