car dealers: where to go in the era of great changes
2024-09-22
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at the end of august, china guanghui auto, the second largest automobile dealer group in the country, was delisted from the stock market because its daily closing price was below 1 yuan for 20 consecutive trading days. on the day of delisting, its market value was only 6.471 billion yuan, a drop of nearly 94% compared to its peak of over 100 billion yuan.
on august 30, zhongsheng holdings, the country's number one automobile dealer group, released its semi-annual report, with operating income of 82.42 billion yuan, a slight increase of 0.6% year-on-year, but net profit fell 47.5% year-on-year to 1.58 billion yuan, continuing last year's downward trend and falling into "increased revenue but not increased profit."
the automobile dealer market is undergoing a dramatic change.
delisting and delisting face the challenge of survival
the delisting of guanghui auto was unexpected. as a leading domestic dealer group that has been on the "top 100 dealer groups in china's automobile distribution industry" for 13 consecutive years, guanghui auto's distribution network covers 28 provinces, autonomous regions, and municipalities, operating a total of 735 business outlets, including 695 4s stores. it ranks second in market size and first in car sales among all dealer groups. in 2022, guanghui auto began to suffer losses. unexpectedly, in just two years, the former giant was forced to delist.
recently, many car buyers have reported that it is difficult to pick up cars at many 4s stores under guanghui, including bmw shanghai baoxin, zhongguo baohong, shanghai huibaohang, guanghui baohong and gac toyota kailong xuhui store.
in the first half of this year, auto dealers delivered a large-scale decline in half-year performance. in the 2024 china auto distribution industry dealer group top 100 ranking, the financial reports of the top 10 listed companies after zhongsheng holdings show that except for century united holdings, the operating income of the other dealers in the first half of the year has declined year-on-year; except for sinomach automobile, the net profit of the other dealers in the first half of the year has fallen sharply year-on-year, of which 4 have fallen by more than 100%, and even more than half of the dealers are in a loss state.
under the fierce competition of "trading price for volume" and the impact of sales of new energy vehicles and directly-operated stores, car dealers have frequently experienced "explosion" incidents in the past two years.
in october 2022, rundong auto, one of the top 100 luxury car dealers, went bankrupt and delisted; in february 2023, zhejiang zhongtong holdings, the largest automobile dealer group in taizhou, "ran away"; in june 2023, pangda group, a leading automobile dealer and the "king of 4s stores", delisted.
since the beginning of this year, the trend of dealers withdrawing from the network has intensified.
in january, many 4s stores of guangdong yongao, a 27-year-old veteran dealer group, were on the verge of bankruptcy and decided to officially close on march 1, 2024.
in june, weijia automobile, the largest automobile trading group in zhengzhou, henan province, applied to withdraw eight dongfeng nissan 4s stores from the network at one time.
in july, the largest auto dealer in yancheng, jiangsu, senfeng group, "exploded", involving more than 60 4s stores of 25 brands, and also involved wage arrears and user deposits diverted for other purposes. the asset restructuring was completed only after the local government intervened. in the same month, xinfengtai, one of the largest auto dealers in northwest china, announced the transfer of three companies in jiangsu: suzhou xinfengtai toyota, wuxi xinfengtai and yangzhou xinfengtai junsheng. all three companies were in a loss in 2023, of which suzhou company lost 9.821 million yuan, wuxi company lost 1.479 million yuan, and yangzhou company lost 720,000 yuan.
with the pressure of operation, dealers have joined forces to "force the palace" of car companies. in may this year, several insiders revealed that because porsche china pressed dealers to complete sales tasks, dealers who were already in a loss-making state were unwilling to bear the huge financial pressure. therefore, some dealers stopped picking up cars as a bargaining chip, demanding subsidies from the headquarters and replacement of senior executives. in august, a letter with a seal circulated on the internet, stating that due to the heavy inventory pressure, dealers across hunan province decided to suspend picking up cars from beijing hyundai and no longer accept vehicles automatically delivered by beijing hyundai. at the same time, they were required to solve the existing inventory and honor all previous incentive policies.
the "2024 first half national auto dealer survival status survey report" released by the china automobile dealers association shows that the overall dealer satisfaction score in the first half of the year was 69.7 points, and dealers' overall satisfaction with manufacturers has declined significantly. the main manifestations are the serious inversion of new car prices, chaotic market prices, lack of continuity in manufacturer policies, and the occurrence of tie-in sales and inventory pressure, which has increased the operating pressure on dealers, and a large number of dealers are losing money or on the verge of losing money.
the survey shows that 28.8% of dealers have achieved their half-year sales targets, and 33.3% of dealers have achieved less than 70% of their sales targets, with joint venture brands achieving a relatively low sales target. in the first half of the year, 50.8% of dealers suffered losses, while 35.4% made profits, a significant increase from the previous year.
car dealers are experiencing a visible downturn.
the halo has faded and the former glory is no longer there
the rapid development of china's automobile market is, to a certain extent, due to the dealer model.
in the early stage of my country's automobile market, automobile sales were not high and maintenance services were relatively rare. "selling cars" was the main way to make profits in the automobile market, so the direct sales model of automobile companies was mainly adopted. as national policies promoted the full opening of the automobile market, automobile production and sales grew rapidly, market competition intensified, and automobile companies began to shift from direct sales to sales cooperation with agents and dealers to share cost pressure and seize the market.
in 1999, gac honda opened the first 4s store in the mainland in baiyun district, guangzhou, and sold the first honda accord. together with this 4s store, gac honda also released the first set of standardized service procedures for 4s stores in the country. subsequently, 4s stores such as the shanghai general motors sales service center and fengshen automobile franchise store opened one after another, marking the official entry of the automobile dealer model with brand management as the core into the chinese market. each brand's 4s store has standardized specifications and quality assurance for a series of service procedures, from exterior design to interior decoration, from hardware investment to software management, from pre-sales, sales to after-sales, and the distribution system has expanded rapidly and gradually become the mainstream. that year, china's automobile sales were only more than 1.8 million vehicles.
with the rapid development of the economy, cars have become an important household item. in addition, dealers have shifted from single stores to group development and have gradually implemented refined management for market segments. china's auto sales have grown rapidly, reaching 13.6448 million units in 2009, surpassing the united states for the first time to become the world's largest auto producer and seller.
chinese auto dealer groups also saw a surge in size and listing. in 2010, zhongsheng group was listed in hong kong, becoming the first listed dealer group in the mainland. in 2011, pangda group became the first dealer group to be listed on the a-share market. in 2016, guanghui auto successfully surpassed the us autonation through mergers and acquisitions and listings to become the world's largest dealer group.
however, the rapid expansion of the dealer group has also brought a series of problems.
for example, although 4s stores are officially authorized dealers, consumption, especially after-sales, is not transparent. in 2015, the media exposed that 4s stores of dongfeng nissan, shanghai volkswagen (later renamed saic volkswagen), mercedes-benz and other brands deliberately falsified and exaggerated vehicle failures to make huge profits. in 2021, more than 100 4s stores under zhengtong automobile group were exposed for illegally using facial recognition systems. taking its bmw 4s store as an example, the camera will automatically perform facial recognition on the user after entering the door. without the user's consent, the system automatically saves their facial data, gender, age, number of visits to the store, time of arrival and other related information as future marketing clues. 4s stores have been criticized by consumers.
the operating environment of 4s stores is no longer "friendly". since 2014, the growth rate of the domestic automobile market has slowed down significantly, with year-on-year growth falling from 13.9% in 2013 to 6.86%. in order to increase sales, many car companies have pushed their inventory to dealers. in order to sell cars to ensure capital turnover and get rebates from car companies, dealers have to sell cars at prices lower than the purchase cost, resulting in a more and more serious phenomenon of inverted prices in the terminal market. by 2019, inverted sales prices of new cars have become the norm, and "losing money on every car sold" has become an industry nightmare.
as a result, the profit structure of dealers has gradually changed, from the traditional profit model based on new car sales to a profit model based on after-sales service and financial insurance business. according to statistics, in 2019, the new car business can only contribute less than 5% of the profit to dealers on average. by 2023, it will directly turn from positive to negative, losing 15.6% of the profit. the opaque charging model of after-sales and financial business has caused consumers to have a worse reputation for dealers, falling into a vicious cycle.
in 2020, the number of authorized dealers of automobile brands nationwide declined for the first time.
who tripped up the "tradition" in direct live broadcasting?
faced with a car dealership market lacking trust, tesla took the lead in "declaring war" on the much-criticized 4s stores.
in 2013, the first tesla experience center in china opened at parkview green in beijing, ushering in the direct sales model in the chinese auto market.
tesla founder elon musk believes that the dealer model is highly rigid and prices are opaque, while under the direct sales model, manufacturers can establish direct contact with customers, better understand needs, have transparent and unified prices, and are conducive to the creation of a high-end brand image. he even bluntly stated that "cooperation with dealers will not end well."
currently, tesla has more than 520 directly-operated stores in china, covering 83 cities; there are 297 directly-operated after-sales and authorized body repair centers, covering 180 cities.
tesla’s success in sales has also allowed china’s new car-making forces to see the potential of the direct sales model.
after their establishment, "new forces" such as weilai automobile and ideal auto all adopted a "de-4s" direct sales model, bypassing dealers to establish direct contact with end consumers. like tesla, consumers only need to browse information on the official website, refer to the unified pricing, and then go to offline direct stores for a test drive experience before finally purchasing. in addition to the direct stores, there are also brand showrooms set up in busy areas or shopping malls. customers can learn about and experience product configurations while shopping in the mall, and can place orders online after deciding to buy. the user reach rate has increased compared to the dealer model.
auto brands have also successfully established their brand tone and influence through the direct sales model. take ideal auto, the new car manufacturer with the highest sales volume, as an example. as of june 2024, ideal auto has 497 direct retail centers in china, covering 148 cities; and 421 direct after-sales and authorized body repair centers, covering 220 cities.
some new energy brands established by traditional car companies have also "embraced" the direct sales model. he zhiqi, senior vice president of byd group and chief operating officer of passenger vehicles, said at the launch conference of the 2023 fangchengbao "leopard 5": "fangchengbao and denza are both positioned as high-end brands. high-end brands must emphasize the connotation of the brand's core culture and achieve perfection in every aspect. the direct sales system can better reflect the company's strategy in all aspects of management, and put customer experience or customer interests first."
this directly led to the loss of some new energy vehicle market share for auto dealers. in addition, most 4s stores are joint venture brands, many of which missed the new energy dividend and had low sales. in addition, the maintenance requirements of pure electric vehicles are far less than those of fuel vehicles, making it even more difficult for dealer groups to turn around.
in addition to directly-operated stores, the live streaming marketing model has also impacted traditional dealers to a certain extent.
2019 is considered the first year of "live streaming to sell cars". wei ya tried live streaming to sell cars, with a total transaction volume of 1.9 million yuan in 2 hours; li xiang live streamed goods for great wall motors, selling more than 200 cars in a single session. the transaction volume of a live broadcast can even rival the monthly sales of a 4s store.
in 2020, the epidemic accelerated the process of live streaming car sales, and more anchors who were not internet celebrities or stars also joined the "car sales battle". take "zhu zi buys a car" as an example. it started by "selling cars" in the douyin live broadcast room, and its scale has gradually expanded. the number of its anchors has gradually expanded from single digits to hundreds, including anchors with millions of fans. in 2023, "zhu zi buys a car" delivered more than 12,000 cars through live streaming terminals, and more than 10,000 cars have been delivered in the first half of this year alone. it is difficult for many traditional 4s stores to achieve annual sales of 1,000 vehicles.
since the beginning of this year, many "big names" in the automotive industry, such as lei jun, li bin, wei jianjun, li yanhong, and zhou hongyi, have personally participated in live broadcasts. although the "big names" are not directly selling cars, live broadcasts have undoubtedly broken the monopoly of traditional dealers and automotive vertical media, and established a new way of playing and order in terms of customer acquisition.
only iterative innovation can ensure long-term success
is the dealer model dead? not really. in fact, quite the opposite. the auto dealer market is turning around.
in september last year, xiaopeng motors launched the "jupiter project" to adjust the ratio of the two channel models of direct sales and authorized franchise, and planned to gradually replace the direct sales model with the dealer model.
entering 2024, many new energy vehicle brands are also gradually introducing dealer models. in may, avita, which mainly relies on the direct sales model, started channel reform and announced that it would only retain the direct sales model in first-tier cities such as beijing, shanghai, and guangzhou, and gradually change to the dealer cooperation model in other cities. so far, 90% of avita stores have switched from direct sales stores to dealerships.
in june, byd's denza and fangchengbao automobile announced that they would recruit dealers from all over the society. in the future, they will adopt the "direct sales + dealer partners" channel model to build a diversified channel system. in addition, weilai's ledao brand has introduced dealers to set up stores. leapmotor, zeekr, zhiji and other brands are also constantly adjusting the ratio between direct stores and dealers. xiaomi automobile, as a "new player", also adopts the "1+n" sales model, where "1" represents the delivery center and n represents agency sales and authorized services.
overall, the dual-track model of "direct sales + dealers" is becoming a new choice for many car companies.
the transformation of auto companies in sales channels is not difficult to understand. in the early stage of brand building, the direct sales model will be adopted for brand promotion, market expression, user information feedback and other considerations. however, the disadvantage of the direct sales model is that the construction and management costs are too high. when the product volume is increased, the brand carrying capacity requirements become higher, which will bring huge operating pressure. according to the different development stages of the company, it is inevitable to continuously adjust and optimize policies.
zhao changjiang, general manager of byd’s sales division, explained why byd no longer adheres to the direct sales model, saying that “based on the fact that byd’s development has entered a new stage of ‘intensive product launches, rapid channel expansion, and rapid market growth’, and based on the realization of future product sales targets of 500,000, 1 million, or even higher, channel transformation is imperative.” xiong tianbo, general manager of the fangchengbao division, also said that fangchengbao has completed the construction of 185 stores from 0 to 1 across the country. behind each store is a complex project of site selection, design, and construction. however, users still receive information about too few stores and inconvenience in experience. the lack of channel locations has limited the efficiency of fangchengbao, a new brand, in reaching users.
in addition to operating pressure, each region's market environment, consumer demand and policy orientation are different, and it is difficult for directly-operated stores to have a comprehensive understanding of all cities, especially third- and fourth-tier cities.
the advantages of the dealer model are gradually emerging. with their own networks and resources, dealers are spread across third- and fourth-tier cities, have a better understanding of the local market, and are better at formulating corresponding sales strategies based on regional differences to increase market penetration. yuan xiaolin, volvo's global senior vice president, said that the dealer model is still one of the most efficient, professional and important touchpoints for serving consumers. "direct sales + dealers" complement each other's advantages, or it may be a more suitable choice for today's new energy vehicle market.
however, after introducing dealer resources, how to avoid repeating the mistakes of price opacity, internal order grabbing, and vicious price competition, and work with dealers to jointly promote business model innovation are still urgent issues that automakers need to solve.
since the development of china's automobile industry, the pace of innovation and change has never stopped. as the market share of new energy vehicles continues to grow, the market is more expectant than ever before of every step taken by dealers on the road to transformation, not only because of sales, but also because of the innovation of their business model, which gives strength to the brand and hope to the industry. (li yifan and chen yunfu)
the economic information daily
