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  • Writer's pictureJulia Xu

China's Consumer Market Collapse: A Comprehensive Overview




Translation of 消费大崩盘 an analysis of market intel

Recently, it seems that the high-end consumer market in China is experiencing a real collapse.


Firstly, in the luxury car sector, both new and used cars are facing a collapse in prices and market demand. For instance, BMW 735 is now generally discounted by more than 20 points, and the domestically-produced Mercedes-Benz GS, which used to require additional fees, has seen a direct reduction of 100,000 RMB. Even Audi Q7 and the entire Porsche lineup are undergoing aggressive price cuts. Porsche reported a 40% drop in sales in the Chinese market for the third quarter of 2023, making it the only global market experiencing a decline.


As mentioned earlier, a relative involved in luxury car financing has not closed a deal in the past two months due to a lack of internal customer sources. This sector is particularly vulnerable to economic conditions, as customers with the financial capacity to buy luxury cars often do not require financing. Those seeking loans to buy luxury cars are generally considered less financially stable and motivated by business or status-oriented needs.


The used luxury car market is even worse, with a surplus of vehicles causing dealers to aggressively cut prices. This has led to a collapse in the prices of cars from all brands, and the luxury car exchange chain for million-dollar cars is breaking.


The second sector experiencing a downturn is the luxury watch market. Starting in May 2023, there has been a significant decline in transaction volume, resulting in a subsequent drop in prices. Popular models, such as the Rolex Submariner, have seen their prices nearly halved from the peak, with even more affordable models like the GMT-Master II dropping from 250,000 RMB to less than 150,000 RMB.


Previously active discussions on platforms like Little Red Book about watch prices have dwindled, and many enthusiasts are either selling without buying or reducing the total value of their watch collections. Many watch dealers who used real estate loans as collateral for their businesses are now facing a double blow with falling property and watch prices, erasing the profits earned in previous years.


The third sector facing collapse is the piano market, especially in children's extracurricular interest classes. Buying a piano costs tens of thousands, and the expenses associated with learning and taking exams are even higher. Recent reports indicate a sudden disappearance of both those learning to play and those buying pianos overnight. Half of the piano factories closed last year, and pianos purchased for five or six thousand RMB in the past are now unsellable.


This situation is echoed in the financial reports of listed companies in the piano industry, with both Pearl River Piano and Hailun Piano experiencing sharp declines in revenue and net profit.


Upon reflection, the reasons behind these market changes are relatively straightforward. In the case of the domestic musical instrument market, particularly pianos, it has historically functioned more as a certification market than a pure musical instrument market. The decrease in the number of piano-playing children due to low birth rates naturally led to a downturn in the certification market. Coupled with economic decline and consumer downgrading, the circulation of electric pianos and second-hand pianos has further contributed to the complete collapse of the piano market.


Referencing the development of the piano market in Europe, America, Japan, and even nearby Taiwan, the trajectory of the piano market has consistently followed this pattern. Decades ago, Japan experienced a piano-learning boom during its economic prosperity, resulting in a surplus of second-hand pianos that were later sold to China.


From luxury cars and watches to high-end training, these high-end consumer markets have coincidentally collapsed in 2023.


Behind this collapse is not the sudden impoverishment of wealthy individuals in China, but the collective breakdown of small and medium-sized business owners and urban middle-class individuals who masqueraded as wealthy. The bubble supporting the high-end consumer market in the past was, in reality, sustained by the middle class, those aspiring to a beautiful life with high expectations.


In 2023, the real estate and stock markets have suffered significant declines, industries across the board are cutting salaries and laying off employees, the values of middle-class homes have plummeted, the illusion of wealth has shattered, incomes have drastically reduced, and consumer confidence has fallen into an icy abyss. Apart from maintaining essential expenses, many are desperate to save every bit of money in the bank.


The key to 2024 lies in whether the real estate market can stabilize. If the real estate market remains unstable, everything else is off the table. Only when the real estate market stabilizes, the economy stabilizes, and everyone's assets stabilize and appreciate, high-end consumption is likely to recover.

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