Initial Quality with Domestic Brands in China Improves Significantly, Narrowing the Gap with International Brands

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Lexus and Mercedes-Benz Rank Highest in Initial Quality in a Tie; Beijing Hyundai and Shanghai General Motors Each Receive Two Model-Level Awards

SHANGHAI: 31 October 2013 Domestic automakers are making strides in improving vehicle initial quality, as Chinese brands significantly narrow the gap with international brands helping drive the overall industry average problem rate in China to a record low, according to the J.D. Power Asia Pacific 2013 China Initial Quality StudySM (IQS) released today.

The study, now in its 14th year, examines problems experienced by new-vehicle owners within the first two to six months of ownership in two distinct categories: design-related problems and defects and malfunctions. The overall initial quality score is determined by problems reported per 100 vehicles (PP100), with a lower rate of problem incidence indicating higher quality.

Overall initial quality of domestic brands improves to 155 PP100 in 2013, a significant decrease of 57 PP100 from 2012. Initial quality of international brands also improves year over year, to 104 PP100 in 2013 from 117 PP100 in 2012. The gap is quality scores between domestic brands and international brands has narrowed to 51 PP100 in 2013 from 95 PP100 in 2012.

The improvement of Chinese domestic brands is largely driven by a significant reduction in the number of problems related to the engine/ transmission and heating, ventilation and air conditioning (HVAC) system, each decreasing by 12 PP100.

"Chinese domestic brands achieve tremendous improvement in vehicle quality in 2013, with four domestic brands--GAC Motor, Venucia, Roewe and Luxgen[1]--performing above industry average," said Dr. Mei Songlin, vice president and managing director of J.D. Power China. "We have seen the gap with international brands continually narrow during the past 14 years from 396 PP100 in 2000."

Overall initial quality across the industry averages 119 PP100 in 2013, which represents the lowest number of problems since the inception of the study in 2000.

When examining initial quality by country of manufacturer origin, Korean brands have the highest overall initial quality with an average of 85 PP100, which is an 8 PP100 improvement from 2012. Japanese brands average 104 PP100 and improve by 9 PP100 from 2012. European and U.S. brands each average108 PP100, with improvements of 11 PP100 and 28 PP100, respectively, from 2012.

Maintaining high initial quality is critical to retaining current customers and attracting new customers. According to the J.D. Power Asia Pacific 2013 China Sales Satisfaction Index (SSI) Study,SM initial quality is the most important driver of purchase decisions by new-vehicle buyers. The 2013 China IQS finds that among owners who experience no problems with their vehicle, 36 percent say they "definitely will" recommend their brand to others, while 18 percent say they "definitely will" repurchase the brand. In contrast, among owners who experience more than one problem with their vehicle, the rates of those who say they "definitely will" recommend and repurchase decline to 25 percent and 12 percent, respectively.

"To further improve initial quality, automakers should focus on the most frequently reported problems among Chinese vehicle owners, such as issues regarding fuel efficiency and various noise problems," said Tony Zhou, automotive research director at J.D. Power China.

Excessive fuel consumption has remained the most frequently reported problem since 2007. New-vehicle owners in China tend to be particularly sensitive to noise problems; with brake noise and excessive wind noise the second- and third-most-frequently reported problems. Abnormal engine noises and tires--excessive road noises are also among the most frequently reported problems.

2013 China IQS Ranking Highlights

Lexus and Mercedes-Benz tie for highest-ranked nameplates in the study, averaging 52 PP100 each. Subaru (64 PP100) ranks third, followed by Volkswagen (66 PP100) and BMW (67 PP100).

The model-level rankings show considerable global diversity. Among the 213 models examined in the study, two models from Beijing Hyundai (Hyundai Verna and Hyundai Sonata) and two from U.S. brand Shanghai General Motors (Chevrolet Sail and Buick GL8) rank highest in their respective segments. Receiving one award each are Japanese brands Toyota (Toyota Corolla EX) and Subaru (Subaru Forester); German brands BMW (BMW X1) and Mercedes-Benz (Mercedes-Benz E-Class); and Chinese domestic brands BYD (BYD F0) and Changan (Changan Star 2).

In total, 10 vehicle segments are eligible for awards in the 2013 China IQS. Models ranking highest overall in their respective segments are:

  • Compact: BYD F0
  • Premium Compact: Chevrolet Sail
  • Entry Midsize: Hyundai Verna
  • Midsize: Toyota Corolla EX
  • Upper Premium Midsize: Hyundai Sonata
  • Luxury: Mercedes-Benz E-Class
  • SUV: Subaru Forester
  • Luxury SUV: BMW X1
  • MPV: Buick GL8
  • Mini Van: Changan Star 2

The 2013 China Initial Quality Study (IQS) is based on evaluations from 21,181 owners of new vehicles purchased between October 2012 and June 2013. The study analyzes models in 12 vehicle segments and includes 213 different passenger-vehicle models from 65 different brands. The study was fielded from April to August 2013 in 46 major cities across China.

About J.D. Power Asia Pacific

J.D. Power Asia Pacific has offices in Tokyo, Singapore, Beijing, Shanghai and Bangkok that conduct customer satisfaction research and provide consulting services in the automotive, information technology and finance industries. Together, the five offices bring the language of customer satisfaction to consumers and businesses in China, Australia, India, Indonesia, Japan, Malaysia, Philippines, Taiwan, Thailand and Vietnam. Information regarding J.D. Power Asia Pacific and its products can be accessed through the Internet at www.jdpower.com. Media email contact: ellen_wang@jdpa.com. Please follow J.D. Power at http://e.weibo.com/jdpowerchina.

About J.D. Power

J.D. Power is a global marketing information services company providing performance improvement, social media and customer satisfaction insights and solutions. The company's quality and satisfaction measurements are based on responses from millions of consumers annually. Headquartered in Westlake Village, Calif., J.D. Power has offices in North/South America, Europe and Asia Pacific. For more information on car reviews and ratings, car insurance, health insurance, cell phone ratings, and more, please visit JDPower.com. J.D. Power is a business unit of McGraw Hill Financial.

About McGraw Hill Financial

McGraw Hill Financial (NYSE: MHFI) is a leading financial intelligence company providing the global capital and commodity markets with independent benchmarks, credit ratings, portfolio and enterprise risk solutions, and analytics. The Company's iconic brands include: Standard & Poor's Ratings Services, S&P Capital IQ, S&P Dow Jones Indices, Platts, CRISIL, J.D. Power, and McGraw Hill Construction. The Company has approximately 17,000 employees in 27 countries. Additional information is available at www.mhfi.com.

Media Relations Contacts

Ellen Wang; Public Relation Supervisor; J.D. Power Asia Pacific; Shanghai, 200040 China; +86 21 2208 0831; ellen_wang@jdpa.com

John Tews; Director, Media Relations; J.D. Power; Troy, Michigan 48083 USA; 001 248 680 6218; john.tews@jdpa.com

No advertising or other promotional use can be made of the information in this release without the express prior written consent of J.D. Power. www.jdpower.com/corporate.

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[1] No domestic brand exceeded industry average in the J.D. Power Asia Pacific 2012 China Initial Quality Study.SM

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