Traditional 4S stores are being pushed to the corner, and more and more new energy vehicle direct stores are selling new energy vehicles

Amidst the hustle and bustle, the domestic car market has delivered six months of results. According to data released by the China Association of Automobile Manufacturers on July 10th, in the first half of this year, the retail sales of the domestic passenger car market maintained a month on month growth for six consecutive months, with a cumulative retail sales volume of 9.524 million vehicles, a year-on-year increase of 2.7%. However, the gradually recovering car market has not brought much warmth to car dealerships. On June 30th, the first large group of domestic car dealers was officially delisted. The dismal delisting of the former "king of 4S stores" is seen as a microcosm of the current difficult situation in the automotive dealer industry. Faced with the wave of new energy, traditional car 4S stores are constantly being pushed to the corner.

Industry norm: "Unable to earn money"

Han Zhen, Secretary General of Anhui Automobile Dealers Association, bluntly stated that "not earning money" has become the norm in the industry. The hardships faced by domestic car dealerships have not only begun this year. 2018 is seen as a turning point in the automotive distribution industry. During this year, China's cumulative sales of new cars reached 28.0806 million, a decrease of 2.76% compared to 2017, marking the first annual decline since 1990. Since then, it has been declining year by year, and the era of "lying back and making money" for automotive dealers has gone forever. The 2022 National Automobile Dealers Survival Survey Report released by the China Automobile Distribution Association in February this year showed that less than 20% of dealerships achieved their annual sales targets last year, less than 30% achieved profitability, and 45.2% of dealerships were in a loss making state. The price war in the car market in the first half of this year was, in a sense, triggered by the struggles of dealers to survive. Tesla's unexpected price reduction at the beginning of the year fired the first shot at the price reduction of new energy vehicles. Under the dual pressure of switching national standards for fuel vehicles and declining sales, the wave of price reductions has rapidly swept through the fuel vehicle market. In March, marked by the "hard core subsidies" provided by Hubei Province to various brands under Dongfeng, a comprehensive price war broke out, involving almost all mainstream brands. The main theme of price reduction runs through the entire car market in the first half of the year. Han Zhen told reporters that taking the Anhui market as an example, luxury brands led by BBA currently generally lower prices by more than 10%, with some models reaching a maximum of around 18%. Moreover, the pressure of price reduction continues to spread downwards, making it impossible for economy models with relatively small profit margins to yield, resulting in sluggish sales; Mid range brands located in the "sandwich layer" are the most vulnerable, especially some mainstream joint venture brands, whose traditional fuel vehicles have performed poorly in the market. Dealers hope to sell more cars through price strategies to complete sales tasks, and the impact of price reductions on overall profit margins is also immediate. Han Zhen revealed that after this round of price wars, luxury brand dealers in the Anhui market lost at least 30% of their profits. In some regions of China, there have even been extreme cases of dealers providing "meat cutting" subsidies. Faced with sales pressure and significantly reduced profits, the current situation of car dealers can be imagined. On July 6th, the China Association of Automobile Manufacturers organized 16 automobile production enterprises to jointly release the "Commitment Letter for Maintaining a Fair Market Order in the Automobile Industry", aiming to put the brakes on the increasingly fierce price war. However, after the release of the commitment letter, the first clause "not disturbing the fair competition order of the market at abnormal prices" was accused of violating the spirit of monopoly law. Subsequently, the China Association of Automobile Manufacturers (CAAM) issued a statement announcing the deletion of relevant clauses from the commitment letter. After the controversy of clause deletion, does it mean that the price war will continue in the future? A car dealership industry practitioner who declined to be named stated that the industry is generally not optimistic about this. More importantly, price wars are not the main cause of hardship for car dealerships. Even if the price war is immediately extinguished, the industry still has greater challenges to face.

4S store: not needed

On July 3rd, China's new energy vehicle industry reached a milestone moment, with a cumulative production exceeding 20 million vehicles. At the same time, the market performance of new energy vehicles has also been booming. According to data released by the China Association of Automobile Manufacturers, the cumulative retail sales of new energy vehicles in the first half of this year were 3.086 million, a year-on-year increase of 37.3%. In June this year, the domestic retail penetration rate of new energy vehicles has reached 35.1%. The hot sales of new energy vehicles are not related to traditional car dealerships. On the contrary, the direct sales model led by new energy vehicle manufacturers has further intensified the impact on traditional car distribution models, exacerbating the "hardship" faced by dealers today. "In popular terms, the gameplay has been overturned," said Han Zhen. In 2013, Tesla, regarded as a catfish in the industry, entered the Chinese market. The direct sales model adopted by it has since been imitated by many domestic new car making brands and gradually become a standard feature in the sales field of new energy vehicles. Unlike the traditional 4S dealership distribution model, new energy vehicle direct sales stores that bloom everywhere in urban commercial districts often carry the name of image stores and experience stores, and more importantly, carry product exhibition functions, aiming to shape brand image, enhance brand awareness and presence. In terms of sales, consumers make direct payments to manufacturers through the system platform. Direct operated stores do not profit in the sales process, but are paid commissions by manufacturers after delivery is completed. This gameplay without intermediaries earning price differences completely excludes car dealers from the sales system of new energy vehicles. For manufacturers, the direct sales model can bring them greater control over the sales end; For consumers, buying a car has also been simplified as walking into Huawei or Apple's specialty stores to buy a phone. Since Tesla's entry into the domestic market, the direct sales model of new energy vehicles has taken root for a full 10 years, and consumer consumption habits have been basically shaped. New energy vehicle direct stores are gradually shifting from brand standard to commercial district standard. A large commercial complex in Changning District, Shanghai, with the vast majority of the underground space on the second floor, was renovated into a "new energy vehicle block" last year, with nearly 20 brand direct stores settling in. Han Zhen believes that the product characteristics of new energy vehicles are highly compatible with the direct sales model. For new energy vehicles, traditional 4S stores seem to have become an unwanted presence. The so-called 4S refers to vehicle sales, spare parts, after-sales service, and information feedback. The follow-up service for car owners after purchase is the most important function of 4S stores besides sales, and it is also an important source of profit. However, the structure of new energy vehicles is far less complex than traditional fuel vehicles, so there is almost no concept of "maintenance", and after-sales service does not require additional manpower investment; In recent years, various brands have invested in building their own sheet metal spraying centers for the basic maintenance of vehicle bodies, leaving traditional dealers unable to respond. Under the trend of intelligent connected cars, the feedback of car owners can be easily handled by the car infotainment system. When car companies personally exit the sales end, the final existence value of 4S stores is also shattered. At present, many traditional car companies have also begun to introduce direct or authorized store models on their new energy product lines. Volkswagen ID, SAIC Zhiji, Dongfeng Lantu, and some luxury brand new energy vehicle series have also joined the team of opening stores and displaying prototype cars in shopping malls. The abandoned 4S stores have to continue t

Version answer: Not necessarily reliable

The increasing market penetration rate indicates that new energy vehicles have become the trend in the domestic market. How 4S stores can save themselves has become a widely discussed topic in the industry. A basic consensus is that traditional car dealerships must actively embrace new energy. In Han Zhen's words, this is an "unavoidable step". The rapid development of the domestic new energy vehicle industry in recent years is evident, and the market share of traditional fuel vehicles is constantly being eroded. For the automotive dealer industry, it is clearly not wise for car companies to continue to tie up exhausted gasoline vehicles when they repeatedly transmit pressure to the circulation end. Proactively seeking opportunities and entry points in the new market landscape is the top priority. Industry insiders have stated that while the widely used direct stores for new energy vehicles are the current "version answer," they may not necessarily be the ultimate format for new energy vehicle sales. As the industry competition becomes increasingly severe, it remains to be considered whether the current direct sales model can be sustained in the long term for middle and rear end brands. On the other hand, the rental cost of large commercial districts should not be underestimated, and after years of running errands and occupying land, the high-quality space resources left for various brands are already scarce. Relatively speaking, car dealerships still have advantages in terms of channels and land resources. If these advantageous resources can be effectively integrated, 4S stores are not completely incompatible with new energy vehicles. Han Zhen also pointed out that the domestic automobile distribution industry has accumulated sufficient teams and talent reserves after more than 30 years of development. For new energy vehicle brands, especially start-up brands with relatively small volumes, it is better to have professionals do professional work instead of building their own teams to handle sales and maintenance. At the same time, the sales volume and financial reservoir of the traditional 4S store model can also provide certain guarantees for the stable development of car companies. However, embracing new energy as a necessary step is also quite challenging. Once indifferent, but now unable to climb high, it is a huge embarrassment that dealers have to face. Dealers can certainly show a more open attitude towards new energy vehicles, but convincing successful new energy vehicle companies in the market to set aside a slice of the pie for themselves is not an easy task. Trying new brands downwards also requires dealers to bear significant risks. Under the wave of new energy vehicle manufacturing, from the early deaths of Sailin and Ranger to the recent downfall of Weima and Aichi, the "death list" of new energy vehicle companies is also constantly widening. Han Zhen stated that there are numerous brands in the domestic new energy vehicle industry, and in this era of coexistence, the winner is still unknown. If dealers are eager for success and blindly place bets, it may backfire.