When it comes to China’s automotive industry marketing, one thing is for certain — it’s a branding nightmare out there.

The Shanghai Daily doesn’t mince words about it, titling a recent article Car War Sparks Battle of Brands:

“China’s car market continues to be driven by novelty, with a majority of potential buyers attracted to newly-launched vehicles.

The long-established brands and models still have a strong impact,” ACNielsen’s Coquelle said.

China’s car market is poised for accelerated growth but as the sector matures rapidly, huge challenges lie ahead for manufacturers, he added.

“Product innovation and cultivating brand loyalty will be a greater than ever challenge.”

Puts a bit of a damper on the sweeping numbers that start out the article:

Close to 30 percent of Beijing residents own a car, followed by 18 percent in Guangzhou and 11 percent in Shanghai, the report said after surveying more than 1,500 people during May and June in the three key cities.

This represents significant growth from 2004 when car ownership in the three respective cities was 11, five and four percent.

New car sales last year jumped more than 40 percent in the three markets.

But this author isn’t alone in harboring a certain hesitant optimism towards China’s automotive industry and marketing.

Look at this Business Week article A Billion Tough Sells:

The competition is fierce. As many as 100 domestic and 10 foreign manufacturers are slugging it out. Consumers can now select from about 25 entry-level compacts such as the Chery QQ and Honda Motor Co.’s (HMC ) Fit. Not enough choice? Another 25 new models — from subcompacts to SUVs — are due out this year. That may be great for consumers, but it’s murder on manufacturers. The average price for a compact in China has fallen by 28% since 2000, while other categories are off by more than 20%, J.D. Power says. “China used to be a very profitable market for everyone,” but growing competition has eaten into earnings, says Yoshimi Inaba, Toyota Motor Corp.’s (TM ) executive vice-president in charge of China.

For Toyota and its rivals, cracking the code on Chinese buying habits is crucial. That can be tricky. With so many first-time buyers, there’s little brand awareness and almost no brand loyalty. Middle-class Chinese often spend more than a year’s income for even a low-end car, and 89% pay in cash, J.D. Power data show. About half of all Chinese buyers rely on the opinions of family and friends when making this critical purchase. That means driving a dud isn’t just disappointing. It’s also a huge loss of face for both the buyer and anyone who offered advice. Another quirk: One-third of Chinese rate engine and transmission performance as their No. 1 priority, vs. only 19% in the U.S. and 11% in India. A car “has to have an energetic heart,” insists Luo Changyi, a 24-year-old Beijing resident who drives a Volkswagen Golf.

Those same sentiments are echoed in Chinese Automotive Market 2010, a study by Mercer Management Consulting:

The Mercer study shows that foreign brands, thanks to their image, have a head start in the competition for buyers, despite government support for domestic brands. Foreign brands also have a clear lead in customer satisfaction. But given the confusing and rapidly expanding range of products on the market, brand awareness and brand loyalty are naturally still low: only 25 percent of the customers choose the same brand when they buy their next car, compared to almost 80 percent in western industrial countries. Long-term brand images and positions will only emerge over the next few years.

“This is where manufacturers have to buckle down,” Joas continues. “The brand is the only way to escape direct competition. Image is the best sales pitch, even in China.” Still, the study points out that 46 percent of mainstream buyers, and 34 percent in the case of premium cars, would again buy a car of the same brand. Image weakness and lack of differentiation are especially noticeable in the low-price segment: only 7 percent of current car owners maintained that they would buy a car of the same brand.

No sugar coating there.

So what’s a marketer to do for staying ahead? Thankfully, A Billion Tough Sells offers a few good ideas. Here’s one:

To make sure its customers stay happy, Nissan three years ago dispatched six retired dealership executives from Japan to help improve showroom cleanliness, interaction with customers, and after-sales service. The payoff? Nissan dealers in China ranked No. 1 in customer service for 2005, according to J.D. Power. That matters since even routine maintenance problems can be a brand-killer in a market of newbie drivers. Says Yasuaki Hashimoto, who oversees Nissan’s sales in China: “We want our first-time buyers to be second- and third-time ones.”

Customer service is king if you want to get ahead.

Not to rain on the parade here, but one thing struck me about all of these articles: they all seem to ignore certain environmental factors, which could put a few more brakes on the automotive industry. But that’s another topic for another post on China and automotive industry marketing.