SHANGHAI, Oct. 1, 2021 /PRNewswire/ -- Cango Inc.
(NYSE: CANG) ("Cango" or the "Company") is issuing a bi-monthly
industry insight publication called "CANGO Auto View" to bring
readers, drivers and passengers up to speed on the automobile
market's emerging trends.
Below is an article from the Company's 5th edition for
September 2021.
Drivers of the ongoing transformation of the automobile sales
model
Since the invention of the automobile, its sales model has
remained generally static. Automobile manufacturers produce cars
and sell them wholesale to dealers, who are then responsible for
most of the retail sales to end consumers as well as after-sales
services.
The first 4S store in China is
now over 20 years old. A majority of today's Chinese car consumers
were born in the 1990s rather than the 1960s. This new generation
of car consumers grew up in the Internet age and has witnessed
rapid technological advancement, resulting in very different
consumption habits compared to previous generations.
Those born after the 1990s have never experienced an information
gap. They dine at Haidilao, enjoy community-based group buying, and
know what customer-centric services are, no matter where they live.
In the new age of auto consumption, this group has identified
problems with the outdated car-buying process and the so-called
service experience, creating both opportunities and challenges for
automobile manufacturers and dealers.
Problems with the 4S model
Individual 4S dealers are struggling as compared to car dealer
groups due to increased competition, emerging new sales models and
sluggish overall growth. The profit gap between individual 4S
stores and the top 10 car dealer groups' stores is estimated to be
at least three to five million yuan.
Opening an individual 4S store requires an initial investment of 20
to 30 million yuan, and it is an
illiquid investment that can be difficult to sell. Operating a 4S
store also involves management challenges. According to a senior 4S
store manager, if a newly-opened 4S store wants to build an
internal risk control management system, it needs to formulate a
huge set of management standards – as many as 6000 KPIs – which is
a monumental undertaking for an independent store.
Selecting a car brand to sell is also a crucial decision when
opening a 4S store. With the right brand, a 4S store can ideally
secure an annual return of more than 15%, allowing the owner to
recover their initial investment in just five to eight years.
However, such a return is difficult to achieve and depends upon
detailed channel management strategies formulated by traditional
car brands over the years, such as designing a matching sales
target according to the brand's market share within the store's
geographical area and adjusting sales targets according to the
store's historical sales.
Given these risks and challenges, successfully operating a 4S
store is clearly no easy feat. Individual dealers' distress has
increased in recent years as they struggle to compete for capital,
management resources, and talent retention while also navigating
the new age of auto consumption and younger consumers'
demands.
Direct sales and new energy vehicles (NEVs)
It has become apparent that younger car consumers are open to
the new direct sales model. Younger consumers are also more
environmentally conscious than previous generations, driving demand
for NEVs. Between January and July
2021, 1.504 million new energy vehicles were produced in
China, and 1.478 million sold,
both representing 200% year-over-year growth. This fast-growing
market in combination with younger consumers' demand for a new
sales model is driving a major shift in China's auto sales market. Certain new
carmakers, such as Tesla, have adopted a direct sales model to
improve user experience. With a direct sales model, customers order
their car online directly from the carmaker, at a unified retail
price.
Similar changes are happening all over the world. Honda
Australia announced that it will discontinue its current 4S sales
model beginning July 1, 2021.
Existing authorized car dealers of Honda Australia will no longer
sell new models; instead, customers must order cars from Honda's
official website at a unified retail price. Carmakers accustomed to
the 4S sales model must now adapt to online order and offline
pickup, which unifies new car retail prices and limits traditional
4S store dealers' bargaining power on new car sales.
Despite the obvious trend toward direct sales, many new auto
brands did not intend to penetrate the market with this model in
the first place. According to some industry reports, most new
automakers cannot empower the sales channel to make profits because
of their limited brand awareness and products, which means, even if
the brands adopt the dealership model, it's hard to persuade
dealers to participate. Although domestic NEV sales are growing
rapidly, there are simply not enough brands in each region, and
many traditional 4S investors are reluctant to invest heavily in a
single NEV brand because of the huge risk associated with the
limited sales scale.
The ever-growing NEV market, changes in consumer demand and the
industry's own development needs are driving changes to the
traditional car sales model across the entire automotive industry.
Change to this sales model is inevitable, but the market has yet to
determine what shape it will take in the future.
About Cango Inc.
Cango Inc. (NYSE: CANG) is a leading automotive transaction
service platform in China
connecting dealers, financial institutions, car buyers, and other
industry participants. Founded in 2010 by a group of pioneers in
China's automotive finance
industry, the Company is headquartered in Shanghai and engages car buyers through a
nationwide dealer network. The Company's services primarily consist
of automotive financing facilitation, car trading transactions, and
after-market services facilitation. By utilizing its competitive
advantages in technology, data insights, and cloud-based
infrastructure, Cango is able to connect its platform participants
while bringing them a premium user experience. Cango's platform
model puts it in a unique position to add value for its platform
participants and business partners as the automotive and mobility
markets in China continue to grow
and evolve. For more information, please visit:
www.cangoonline.com.
Media Contact:
Juliet
Ye
Cango Inc.
Tel: +86 21 3183 5088 ext.5581
Email: pr@cangoonline.com
Twitter: https://twitter.com/Cango_Group
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SOURCE Cango Inc.