Be fresh but also stable. Editor’s note: This article is from ”
Future car Daily “(micro-channel public number ID: auto-time), Author: Wu Xiaoyu.
Lynk&Co Amsterdam Experience Store Source: Lynk&Co official
Author| Wu Xiaoyu
Edit| Wang Yan
In the face of the direct sales model advocated by new cars, traditional car companies can’t sit still.
Recently, according to media reports, Geely Automobile will set up a new model of electric vehicle product planning and marketing strategy this year. In addition to planning for SEA’s vast intelligent evolution experience architecture models, it is worth mentioning that in sales On the one hand, the new company may set up an independent sales team, and integrate the two sales models of direct sales and dealerships, and provide users with services such as vehicle test drives and sales by opening a showroom in the city center.
As the sales of electric vehicles continue to increase, changes in sales models are also on the agenda, but for traditional auto companies, it is not easy to bet on direct sales.
Wang Luo, general manager of a Geely 4S store in Beijing, told Future Auto Daily (ID: auto-time) that the new forces that adopt the direct operation model have indeed given traditional car companies a lot of new inspiration. Inventory can be directly controlled. In addition, direct control of user data gives car companies more imagination, such as collecting clues from intended users, improving products, and even helping in areas such as autonomous driving.”
At the same time, he is also frank, “The cost of opening a car dealership is extremely high, and one store costs 20 to 30 million yuan, or even more than 100 million yuan.” This also means that blindly choosing the direct operation model will inevitably bring about Huge cost pressure.
AB side of the dealer model
Three years ago, in the depression of the auto market, Geely thrived. In the first half of 2018, Geely Group’s sales volume increased by 44% year-on-year. Song Jun, then deputy general manager of Geely Holding Group Automobile Sales Co., Ltd. once said, “In 2017, Geely 4S stores sold 1,314 cars on average, and more than 95% of dealers achieved balance of income and profit.”
In sharp contrast, in 2018, according to data from the All-China Federation of Industry and Commerce Automobile Dealers Chamber of Commerce (CADCC), more than half of the country’s(53.5%) of auto dealers ended in losses in 2018, and 39% of auto dealers lost more than 1 million yuan in 2018.
Because of the poor sales of the French joint venture brands under Dongfeng, “losing a loss of nearly 600,000 yuan”, Wang Luo, a 4S store distributor, also stepped into the tide of joint venture brand distributors switching to Geely that year.
Wang Luo told the Future Automobile Daily (ID: auto-time), “Unlike other brand dealers, Geely has done a good job in segmenting the sales network, so that it can accurately target consumer groups.”
According to him, Geely’s dealer network is divided into G network and L network. The prices of G-net models are relatively high, including Vision X1, Vision Sedan, Emgrand, etc.; L-net models are more “practical”, and most of the consumer groups are targeted at users in third- to fifth-tier cities, including Vision X3 and Bin Rui, Jiaji and other models.
New Emgrand Source: Geely official
In his view, dealers are like “capillaries” in the layout of the market by car companies, “not only the contacts between companies and consumers, but also the reservoir of car companies’ sales.”
This also allows Geely to achieve a steadily increasing market share as its distributors continue to expand. Official data show that from July 2018 to the end of 2020, the number of Geely Auto dealers nationwide will increase from 965 to 1,750. Financial report data shows that Geely’s market share has risen from 6.2% in 2018 to 6.74% in the first half of 2020.
On the other hand, dealers are also under tremendous pressure from OEMs.
Wang Luo revealed that in order to pursue the completion rate of sales targets, manufacturers will force dealers to “passively replenish inventory.” According to Geely’s financial report for the first half of 2020, since 2019, Geely has begun to provide discounts to its dealers, and its average ex-factory sales price has dropped by approximately 6% compared to the same period in 2019.
Excessive inventory factor has become a shadow of Geely’s distributors. Take July 2020 as an example. At that time, Geely achieved 105,218 new car sales, a year-on-year increase of about 15%. At the same time, data from the China Automobile Dealers Association shows that in July 2020, the Geely Auto Inventory Index reached 2.97. And this means that excessive inventory, operating pressure and risks are very great.
Source: China Automobile Association July 2020 data
In addition, in order to get the manufacturer’s rebate, many dealers did not hesitate to sell at lower prices, which made the price difference of the same model in different 4S stores. A Lynk&Co sales consultant told Future Auto Daily (ID: auto-time), “Many 4S stores dare to sell their cars to users when they lose money, because selling a car may lose thousands of dollars, but one less task may be enough. Take hundreds of thousands of yuan in rebates from manufacturers.”
The “new exploration” of the self-directed brother
In fact, the establishment of a new company this time is not Geely’s first exploration of the direct operation model.
As early as September last year, Volvo announced the launch of a direct sales model, which “will break the traditional dealer distribution model through the combination of online and offline.” In December 2020, Geely also revealed that its Lynk&Co will launch a pure electric vehicle based on the SEA vast architecture in 2021. At the same time, Lynk&Co’s pure electric vehicle sales channel will be relatively independent and directly operated by the company. Responsible, the after-sales service is coordinated with the existing Lynk & Co center.
In addition, the business model of Geely’s high-end electric brand Polestar is also “similar in the same way as the direct sales model.”
Gao Hong, CEO of Polestar, said, “Polestar’s business model is still direct sales, which is no different from other new forces. The difference is that we direct sales but not direct sales”. Gao Hong said that Polestar Space adopts a joint construction model between manufacturers and strategic partners, and the strategic partners are responsible for operation. “The biggest advantage of this model is to allow manufacturers to operate with light assets, while allowing partners to focus more on brands and products.”
Polestar 2 Source: Geely official
Not only Geely, many traditional car-making giants are also aiming for the direct sales model. In the second half of 2020, Volkswagen announced that its electric vehicle ID.3 will adopt a unified price, and users can use online or offlinePlace an order directly with the OEM. Mercedes-Benz board member Bethge predicts that by 2025, 25% of Mercedes-Benz’s passenger cars are expected to be sold through online channels.
The new company may become Geely’s first “two-line” subsidiary. Recently, Li Shufu, chairman of Geely Holding Group, said in an internal sharing that “traditional cars and electric cars can coexist for a long time.” In his view, there is a dynamic adjustment period that cannot be crossed in the transition from traditional cars to electric cars. “This period is also full of uncertainties. We must make progress while maintaining stability and make progress. , Retreat can be defended, with ease.”
In the opinion of Wang Miao, a Geely employee in charge of marketing, whether the new company adopts the model of direct sales or distributors, “now each has its own pros and cons.” Wang Miao introduced that Geely will learn its strengths from new car companies, collect different market data, and conduct research and upgrades on the related technologies of the pure electric architecture SEA. “It is very likely that new models will be launched based on the SEA structure.”
SEA vast architecture Source: Geely official
Hu Zhengnan, Dean of Geely Automobile Research Institute, previously told Future Auto Daily (ID: auto-time) that based on the SEA OS system, not only traditional suppliers will become Geely’s development partners, technology companies, individual users, etc. All can be customized development on this open platform. Therefore, just entering 2021, Geely has made friends and has announced cooperation with Baidu, Foxconn and Ferrari.
“This company is a new attempt by Geely’s software to define the automobile era. Therefore, at the sales level, there is a reason to choose the direct mode of directly controlling user data.” Wang Miao believes.
However, the exploration of direct operation by traditional car companies cannot be realized in a short time. Zhang Yidi, senior director of the user digital product department of Weilai APP, once admitted to Future Auto Daily (ID: auto-time) that the digital product design of Weilai’s sales, after-sales and service-side digital system products are all completed by the digital product department. In contrast, in many OEMs, the APP department, the operation department, and the sales department work independently and cannot form a unity. “It is not twisted into a rope, this is a huge resistance.”
In the opinion of Zhang Haitao, the regional sales manager of Geely, Geely still needs the power of distributors. “The repair, maintenance, and service of the direct sales model require the manufacturer to pay, which is a huge expense.In my opinion, the direct sales model has a lot of resistance when the sales volume exceeds 200,000 vehicles. “
According to Geely’s latest blue action plan, the next focus will be on energy-saving and new energy vehicles, 90% of which are new energy hybrid vehicles, and about 10% are traditional energy-saving and small-displacement vehicles. “Two lines may be the fastest way for Geely to achieve its goals under the current economic strength,” Zhang Haitao said.
(At the request of the interviewee, Wang Luo, Wang Miao, and Zhang Haitao are all pseudonyms in the article.)
Future Car Daily
Future Car Daily