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Chongqing- "By actively seeking integration with NEV manufacturers and adapting their service models, traditional car dealerships can survive and thrive in the new era of automobile retail," said Chen Xueqin, executive vice president of the Chongqing Automobile Business Association, in a recent interview.
▲The AITO M5 is made by SERES. (Photo/ AITO website)
On August 2, the Japanese joint venture 4S store in Chongqing Auto Exhibition Center stood silent. Chongqing Auto Exhibition Center, located in Liangjiang New Area, is one of China's top ten auto trading markets.
Interstingly, data for the year's first half revealed a 6.2% surge in the city's retail sales of automobiles, notably a staggering 90.5% jump for new energy vehicles (NEVs). Traditional car dealers seem to be trapped in a downward spiral.
"In the past, a 4S store would see over ten cars depart from the parking lots daily. Today, we only sell a single car in over ten days," said Mrs. Hu, a saleswoman at a 4S store. Such a sharp decline has led to a series of financial implications, from declining profits to instances where they incur a loss of several thousand yuan on a sale.
The narrative isn't limited to this particular 4S store. The exit of Chongqing Longhua Industrial Group from the distribution market sent ripples throughout the industry. Longhua's distribution of Volkswagen, Volvo, Honda, and Toyota 4S stores closed, reflecting dealers' survival is difficult.
According to the China Association of Automobile Manufacturers, only 20% of traditional dealers reached annual sales goals, while 45.2% bled red ink. Price wars have emerged in a desperate attempt to lure customers, further eating into dealers' already thin margins.
Car ownership in Chongqing's central urban area soared by 117,000 units in 2022, of which 64% were NEVs. Chongqing sold 10,200 NEVs in June, up 101.5% year-on-year. The numbers further prove the popularity of NEVs.
Without benefiting traditional car dealers, the NEVs sales model, a more direct mode, cut out the middleman. Pioneered by Tesla in 2013, this model has become the industry standard, where manufacturers open showrooms in high-traffic areas like shopping malls, allowing direct purchases through their online platforms.
The exponential growth of these direct sales points and low after-sales service needs for these vehicles have rendered traditional 4S stores obsolete.
A potential pathway for traditional auto dealers to survive might be a deep collaboration with new energy vehicle makers.
SERES AITO has given a good example. On July 30, at the Chongqing Auto Exhibition Center, customers flocked to the AITO Authorized User Center to inquire and take test drives. As per the staff at the showroom, weekends see exceptionally high footfall, with over 20 groups of visitors in a single day.
Managed by the traditional dealership Chongqing Aika Automobile Sales Co., Ltd., the center spans 3,800 square meters and offers a comprehensive experience – from sales and customer care to delivery and after-sales service.
Chen Xueqin, executive vice president of the Chongqing Automobile Business Association, rightly points out that SERES AITO actively partners with traditional auto dealers, leveraging these dealerships' vast infrastructure and professional sales teams.
He further explained that NEV makers' spaces in malls or shopping districts for showrooms might become scarce and expensive over time. Instead of incurring high costs and developing a sales and service team from scratch, it's more efficient for manufacturers to collaborate with traditional dealers.
"While traditional 4S stores will unlikely vanish overnight, they're at a pivotal juncture. The rise of NEVs presents both a challenge and an opportunity. By actively seeking integration with NEV manufacturers and adapting their service models, these traditional dealerships can survive and thrive in the new era of automobile retail," he added.
