Synergies of traditional and direct sales models
Posted: October 15, 2021 at 6:00 a.m. EDT|Update: 5 hours ago
SHANGHAI, October 15, 2021 / PRNewswire / – Cango Inc. (NYSE: CANG) (âCangoâ or the âCompanyâ) publishes a bi-monthly industry analysis publication titled âCANGO Auto Viewâ to educate readers, drivers and passengers on trends emerging from the automotive market.
Below is an article from the 5th edition of the Society for September 2021.
With Tesla’s introduction of the Direct Selling Model and New Energy Vehicles (NEVs) driving sweeping changes across the auto industry, traditional 4S dealers are struggling to adapt and stay competitive while that forward-thinking manufacturers are looking for brand differentiators. The direct selling model gives 4S stores the opportunity to leverage their strengths as resellers, service providers, etc., while its pioneer incorporates a more traditional strategy to increase profits.
Used NEVs: a cash cow for 4S stores
As the industry as a whole focuses on NEV innovation, one extremely important aspect of the NEV market is systematically overlooked: used NEVs. NEVs are well known to have a relatively low value retention rate, but the sales margin of used NEVs in 4S stores is generally higher than that of traditional gasoline vehicles. According to 4S dealers, the profit margin of a used NEV, which is roughly calculated using the listed buy and sell prices, is typically over 15%. This is true for many brands – resellers including BYD, Weltmeister, GAC AION and Chery all claim that while there is a limited amount of used NEV sales in their 4S stores, the profit per car is quite high.
Market research shows that the demand for used NEVs is actually much higher than expected. Many NEV dealers reported having sold most of their used NEV inventory (acquired by trade-in) to retail customers, leaving only a small portion for wholesale to car rental companies or platforms. used car transaction online.
Most used NEVs on the market are between three and five years old. Early NEV models had a short battery life, typically less than 300 kilometers. Due to the longer battery life of newer models, the residual value of these used cars has declined rapidly. They usually sell for half or sometimes as little as 20-30% of the original price, creating an attractive opportunity for traditional resellers to buy them from exchange customers at very low prices and resell them for a handsome. profit.
Now that many manufacturers of NEVs have introduced lifetime warranty policies, customers no longer have to worry about the quality of used NEVs. For example, Weltmeister launched the ‘Weltmeister Care +’ program, allowing customers to exchange their old model for a cash coupon worth 61.8% of its original price to be applied towards the purchase of a new model. The residual value of the used car will be determined by the dealership and reviewed by a third party, after which the manufacturer will reimburse the dealership for any price difference.
Since the demand for used NEVs is far greater than the supply, there is no need to improve the current sales model to increase sales. The amount of used EVNs available at dealerships through replacement programs is far from being able to meet market demand. It is still a blue sea market. However, automakers remain open to new sales models. A NEV brand manager from a group of traditional automakers said he would consider all kinds of new sales strategies, whether it’s direct sales, a dealership model, or a new advanced idea. .
Tesla: taking inspiration from the traditional sales model to increase profits
In the face of the ever-changing automotive market, market pioneers like Tesla are constantly refining and improving their sales models. According to public sources, Tesla intends to keep its direct sales model but change the layout and size of its stores to allow a “store + repair shop”, comparable to traditional 4S stores. It also intends to reduce the number of experience stores in malls in first-tier cities and build more 4S-style outlets in areas where car dealers are traditionally located in order to improve its sales and after-sales service capabilities.
Tesla has already approached investors in traditional car dealership stores and automotive business areas with offers to lease their premises, to build “store + repair shop” outlets that are managed directly. However, these outlets would not assume the delivery function. To take Shanghai For example: although Tesla operates a number of outlets and service there, it continues to provide most of its vehicle delivery, financing, vehicle registration and owner training services to that of Shanghai Waigaoqiao Delivery Center. Centralized delivery can reduce costs and help streamline the delivery process while ensuring quality customer service.
After-sales service is one of Tesla’s main motivations for switching to the âstore + repair shopâ model. In the past, Tesla’s after-sales services were provided by its nationally authorized service providers, which have a net profit margin of over 20%. In Tesla’s early days, with less control over its parts and components supply channels, after-sales service profits were even higher. This change will allow Tesla to conduct and enjoy its own aftermarket services, including high-profit services such as metal painting, electromechanical maintenance, and even car washes.
The dealership model will continue to be an indispensable part of the car purchasing process, providing consumers with integrated services encompassing consultation, test drives, interaction and delivery. Dealers must adapt to changes in the industry and leverage their existing strengths to remain profitable. Tesla and other brands of NEV will continue to adjust and refine the processes and systems of their operations, keeping an open mind to advanced and innovative sales models. Regardless of the sales model, branding and services will remain focused on attracting, satisfying and retaining customers.
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 from China the automotive finance industry, the Company is headquartered in Shanghai and engages car buyers through a nationwide dealer network. The Company’s services mainly consist of the facilitation of automobile financing, commercial car transactions and the facilitation of after-sales services. Using its competitive advantages in technology, data insight and cloud-based infrastructure, Cango is able to connect its platform participants while providing them with a premium user experience. Cango’s platform model places it in a unique position to add value to its platform participants and business partners as automotive and mobility markets in China continue to grow and evolve. For more information, please visit: www.cangoonline.com.
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SOURCE Cango Inc.
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