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Singapore Automotive Industry Report: How Japanese car brands can grip a piece of German cars’ share

Singapore has the second-highest population density worldwide. As a cosmopolitan city with a small area and dense population, Singapore has a well-developed public transportation system. MRT and buses have become the main means for locals to travel around. Moreover, the high-priced of a certificate of entitlement (COE) and electronic road pricing (ERP) have made car ownership a status symbol for the middle and high-income groups in Singapore. Thus, it has attracted many foreign car dealers, among which German and Japanese car brands are the most popular among locals. How should Japanese cars maintain their advantage in the highly competitive Singapore car market, and compete with German cars in the high-end market?

Singapore is dominated by small families, hence sedan is the most popular type of car

Through i-Buzz Asia “Singapore Automotive Industry Report”, we found out that the word of mouth (WOM) volume of sedan is more popular than SUV and hatchback. Since the average family population in Singapore is only 3.16, with a "family of three" in the majority, people tend to buy smaller cars instead of large SUV. People who buy MPV are usually large families of the previous generation and wealthy people with higher budget. Due to the narrow roads and small parking spaces in Singapore, hatchbacks with short bodies are also popular.

The wealthier love German cars while middle-class families prefer Japanese cars

Looking at Singapore’s top 10 car brands, German and Japanese imported cars are the most popular, with German brands occupying five seats, Japanese brands occupying three seats, while Korean and Italian brands occupying one seat each. The cost of owning a car in Singapore is high. In order to reduce road congestion, the government levies electronic tolls ranging from NT$10 to NT$120 on cars going to the urban area. At the same time, a car ownership certificate system is implemented to reduce the number of cars. The price of the license can reach NT$1 million. These two factors are the reason why cars only affordable to Singapore's middle- and high-income people.

German cars are more favored by the higher-income class, while Japanese cars are favored by more middle-class families. Most middle-class families in Singapore have a double-salary structure and stable income. They hope to have a decent car to take their children to school and go shopping in the supermarket. However, they relatively have a limited budget and cannot afford large car loans, so they prefer moderately priced Japanese car brands. The affluent class is not the case. They value the quality of life and status. BMW, Porsche, Benz and Audi have a high reputation in the local area, and the rich Singaporean can also afford expensive prices. The lack of competitiveness of Japanese cars in the high-end market makes the overall WOM volume slightly lower than German cars.

Japanese sedans and hatchbacks are favored by middle-class consumers

According to i-Buzz Asia “Singapore Automotive Industry Report”, the most popular car models in Singapore mostly belong to Japanese brands. Among them, Honda Jazz placed the first rank, Toyota has the most diverse car models, while Mazda has two car models on the list. Honda Jazz is convenient for small families to go shopping and park in narrow streets because of its short body and foldable rear seats. The total price of the basic model (including the car ownership certificate) is approximately NT$1.5 million. One of the cheapest cars in the local area, so it is very popular among middle-class families.

Car models with higher WOM volume such as Toyota Vios, Toyota Corolla Altis, Mazda 3 and Mazda 6 cost between NT$1.7 million and NT$2 million. They are more spacious than hatchbacks which attracted the middle-class families who cannot afford German cars. In comparison, the total price of German cars Benz A series and BMW 3 series starts from NT$3.4 million to NT$4.1 million, which is twice as expensive as Japanese cars. Hence, although German car brands have the highest WOM volume, the performance of individual cars is not as high as Japanese cars.

Price and brand are the main consideration for locals | Hybrid car is the next trend

Through the popular keywords in this industry report, i-Buzz Asia discovered that price and brand are the most important elements for Singaporean when purchasing a car, as are the engine and design. In terms of price, Japanese cars have more advantage since the general car models are only half the price of German cars, but in the high-end car segment, Japanese cars have no brand advantage. When it comes to luxury sedans and SUVs, consumer’s top of mind will be German’s BMW, Porsche, Benz and Audi, while Japanese only have Lexus. However, in terms of car models, Toyota Camry, Toyota Alphard and Toyota Harrier are highly discussed among locals. The affluent class will see the brand as a symbol of wealth status, which the Japanese brand car dealers should pay more attention to.

Singaporean consumers also value car engine and design. Now we know that middle-class families and wealthy people can afford cars, thus they put high attention towards car power and appearance to highlight their status and improve driving quality. Engine power has always been the advantage of German cars, and appearance is the best part of Japanese cars. Both have their own advantages.

It is worth noting that hybrid car has recently been highly-discussed to be the future trend in Singapore's automobile industry. The Singapore government provides car license tax reduction for electric and hybrid vehicle purchases, encouraging consumers to replace traditional cars with eco-friendly cars. In terms of WOM volume, the Hybrid model of Honda Jazz is very popular among locals, which is an important element for Japanese cars to win over German cars.

German cars are winning in power engine and technology, while Japanese cars are dominance in appearance and interior space

Looking into the positive and negative reviews of Singapore’s top 5 car brands, i-Buzz Asia discovered that local consumers have different perceptions toward German and Japanese cars. The higher price and high-end models of German cars give Singapore car buyers the expectation of powerful engines, comfortable rides and advanced technology. When discussing German cars, internet users tend to praise their powerful horsepower and stability, which can run fast and smooth on Singapore's flat highways. The interior design and its high-tech equipment, such as voice control, touch control and smart screen, are also well received by consumers.

Japanese cars have the advantages of outstanding exterior design and spacious space, but they are slightly inferior in terms of engine power and noise control. Japanese and Singaporean have a similar view toward design, it has to be simple and elegant. Its spacious space is also in line with the pragmatic consumerism of Singaporeans since they need more space to store their items when going out shopping, and tompang (Malay word for "ride") culture is also popular. The disadvantages that Japanese cars need to improve are engine power and interior sound insulation to increase the purchase willingness of high-income groups who pay more attention to driving quality.

Secure the middle-class market and strengthen the high-class market

i-Buzz Asia “Singapore Automotive Industry Report” analyzes the advantages and disadvantages of Japanese car brands from many aspects. The value proposition of Japanese car brands is to provide Singapore car owners with high-quality and reasonably priced car products, mainly for middle-class families. Japanese car dealers are focusing their efforts on small and medium-sized vehicles and optimizing their interior space, exterior design and reliability. Among the entry-level cars, Japanese car models are more diverse than German cars, allowing middle-class families with limited funds are able to afford car loans. This shows that Japanese brands have clear marketing positioning in the middle-class market.

However, the performance of Japanese cars in the high-class market is undeniably left behind. Japanese brands do not have a contribution to the high-end market because they do not pay much attention to luxury cars. Among the Japanese brands, only Lexus is positioned as a luxury car, while German luxury car brands include BMW, Porsche, Benz, Audi and Bentley which is owned by the Volkswagen group. The success of German cars is reflected in the high-end and niche market. The image of luxury car brands helps establish the status of rich Singaporean. Therefore, Japanese cars should invest more resources in inventing luxury car brands and improving their own engines in order to share a piece of the pie with German cars in the high-priced market.