The research shows that 80 percent of Chinese premium car owners are considered "affluent", defined as consumers with annual disposable household income of more than 200,000 yuan ($32,100).
The incomes of premium car owners surveyed by McKinsey exceeded this threshold level, while the weighted average of annual household disposable income of all surveyed families was 450,000 yuan.
By 2020, there will be 23 million affluent urban households with a compound annual growth rate of 16 percent in China — 7 percent of the country's population and roughly equal to the total number of households in the United Kingdom today, the report said.
It showed that 30 percent of respondents cited "reflection of social status" as the top reason to upgrade to a premium car, while 27 percent cited "self-indulgence".
In addition, the report also said there is the emergence of an entry-level group of potential premium car consumers, called the "new mainstream" households with annual disposable income of 100,000 to 200,000 yuan.
"The new mainstream households care more about style, brand and outward appearance than more affluent consumers, who tend to value technology and vehicle performance," said Sha.
Zheng Shengtao, chairman of the printing and packaging company Zhejiang Sunlead Group Ltd, a company in Wenzhou, owns a stable of luxury cars including a Rolls-Royce and Bentley.
"Owning a car with a well-known brand like Rolls-Royce is a symbol of wealth and reputation for the majority of businessmen," said Zheng, adding that he considers a car as important as his clothes and other accessories.
Yu Kan, a 27-year-old who works in a family business in Shanghai, said he bought his BMW two years ago because of the power of the engine.
"Most young buyers of branded cars like me are keen to get the best possible performance, while the good looks and modern style of the vehicles are also very important," said Yu.
The report said 300 cities will have consumers with sufficient household income to buy premium cars by 2020, up from about 100 cities today.
"In the battle for premium car market share, it is increasingly important to offer more value to customers, differentiate models along key emotional attributes, and prepare to ramp up market presence in China's fast-growing lower-tier cities", added Sha.
To meet growing demand for quality brands, auto manufacturers are also introducing personalized products to the premium car market in China.
Paul Gao, a partner in the Shanghai office and co-author of the report, said: "As consumer preferences continue to diversify, premium automakers may need to further localize vehicle specifications, and even nurture indigenous Chinese premium brands with their joint venture partners to offer China-specific car models at appropriate prices."
Contact the writer at yuran@chinadaily.com.cn
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