SHANGHAI, Oct. 8, 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.
A new sales model for new energy vehicles (NEVs)
Traditionally, automobile manufacturers produce cars and sell
them wholesale to dealers, who conduct retail sales to end
consumers as well as after-sales services through independent 4S
stores. As a new generation of Internet-savvy consumers drives
demand and trends like electrification and auto intelligence become
more popular, an increasing number of automakers have started to
adopt a direct sales model, wherein consumers order cars directly
from the manufacturer's website for delivery or local pickup at a
manufacturer-operated showroom or "experience center." Prices are
unified regardless of region, and rebate-enabled or other dealer
discounts are not available. Tesla, a U.S. automaker and market
leader, was the first to disrupt the traditional sales process by
adopting a direct sales model.
Competition for new consumption scenarios
In addition to competing in areas like technology and capital,
many new car brands have followed Tesla's example and opened car
experience centers in large shopping malls and other high foot
traffic areas, making shopping malls an important NEV brand
battlefield. 4S stores traditionally operate in suburban locations,
far away from the city center, to offer a large area for car
maintenance. In contrast, according to the "Report on the
Development of China's Automobile
Sales Channels in 2020," the current proportion of urban showrooms
for NEV brands is about 65%, and they tend to select large shopping
malls or office buildings in city centers. Sales centers in
particular are located in large shopping centers in bustling
downtown areas. Data has also shown that separating sales and
after-sales services is key for NEV brands. Tesla mainly operates
its after-sales service centers in China through the authorization model by
cooperating with third-party repair and maintenance service
centers.
According to a third-party survey, as of April 2021, Tesla, NIO, XPeng, and Li Auto had
87, 131, 125, and 57 stores respectively in the surveyed shopping
malls. The top three cities in terms of the number of NEV stores
are Shanghai, Hangzhou, and Shenzhen, all of which are mega cities with
"car purchase restrictions and license restrictions." Among them,
Shanghai hosts the richest
portfolio of NEV brands. The Shanghai West Nanjing Road business
district alone hosts Tesla, NIO and XPeng experience stores.
There are numerous possible explanations for this trend. NEV
automakers need to increase brand awareness, and shopping malls,
known as "offline traffic aggregators," attract high-value foot
traffic that can draw the consumers closer to brands, expand
brands' exposure, and enhance brand image. NEVs are also
relatively new to the market and mainly appeal to consumers aged 25
to 40, who have a great deal of spending power, are willing to try
new things, and value excellent customer service and consumption
quality.
Given the various benefits of opening stores at shopping
centers, traditional car companies including BYD, BAIC, SAIC and
Dongfeng, have also begun to compete for space in high-quality
business districts.
Disadvantages of the direct sales model
There are also downsides to NEVs' direct sales model, including
the cost of renting high-quality, high-traffic retail space.
According to the media, the annual rent for XPeng's flagship
experience center in Sanlitun, Beijing, with a floor area of nearly 500
square meters, is about 10 million
yuan. NIO's showroom in Wangfujing, Beijing, occupying 3,000 square meters, costs
as much as 70-80 million yuan per
year.
Because auto industry players are typically well-capitalized,
their demand for space caused rents in shopping malls to rise
dramatically, negatively affecting tenants in catering, apparel and
other businesses with less backing from the capital market.
However, industry insiders generally believe that the practice of
opening stores in shopping centers is only temporary. Currently,
new brands lack brand awareness and customer base, and must choose
store locations with the largest potential audience to build their
brand. Once new brands establish their reputation and fan base,
they will eventually return to more traditional auto business
areas, building larger service centers that customers visit only
when service is required.
Explosive growth of NEV sales presents another challenge for the
direct sales model. If the current growth momentum in NEV sales
continues, sales of NEV brands may reach 200,000 to 300,000 cars
annually. This sales volume requires a huge team for direct
operation, increasing pressure on auto manufacturers – without a
mature sales channel network to take care of the inventory, sales
cannot be estimated accurately, and the risk is simply too
concentrated.
Other risks inherent to the direct sales model have also begun
to emerge. For example, Tesla's Auto Shanghai incident and new
brands' price reductions have clearly shown that manufacturers are
at a disadvantage when handling user complaints and disputes
because of the lack of a buffer between the consumer and the
manufacturer, which was previously the role of dealers. The
Mercedes-Benz Xi'an incident is a positive example of a dealer
acting as a middleman, dealing with issues behind the scenes and
preventing further escalation while protecting the
manufacturer.
Bridging the gap between traditional and direct sales
Some new carmakers have attempted to adopt a dual sales model,
by combining direct sales and directly-operated showrooms with 4S
dealerships in a single city. However, this creates a conflict
between dealers and the manufacturer, as well as an inconsistent
consumer experience. Therefore, a brand that establishes the direct
model in a given city must continue with that model to avoid
conflicts of interest and ensure consistent prices and services. By
building up a direct store management team in charge of brand
showcase, user operation, user experience, user services, test
drives and charging services, and dedicate professionals to
different segments, costs can be reduced while greatly improving
customer satisfaction.
The NEV market and the younger generation of consumers will
shape the development of direct sales model. Traditional automakers
are already evolving to remain relevant and compete with their new
energy peers, driving an industry-wide revolution.
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.