A Suite of Emerging Auto Brands in China Adding Retail Store to Double down on Sales Growth
The stock price of Tesla has recently skyrocketed to nearly USD $1500. The founders easily cashed in billions of dollars in bonuses. Emerging millionaires have continuously emerged among employees… The record-breaking performance of the Chinese market has proven to Tesla that he had dreamed big enough for this number one automotive market in the world.
On July 9, Tesla CEO Elon Musk praised on social media: “The Tesla China team is great!” According to data from the China Passenger Car Association, in May this year, Tesla sold 11,095 Model 3 electric vehicles produced by the Shanghai plant, occupying a 53.2% share of its global market. Dan Ives, an analyst at Wedbush Securities, believes that the relatively sluggish global macro economy and the Chinese market, which is full of strong demand, are undoubtedly the first light in the dark for Tesla.
Tesla, who once shouted to close its offline stores to “open source and cut costs,” has uncharacteristically planned to extend its tentacles to more Chinese cities and the wider Chinese market. On July 9th, Musk announced that he would visit the Shanghai Super Factory as soon as possible, and also announced that Tesla would do a lot of original design and development in China, rather than simply copying American things directly to China.
When traditional car companies tried to adapt to the new online marketing model, new players like Tesla have began to expand retail network.
Tesla Expanding Store Network
Lin Feng, the first Chinese car owner of Tesla, remembers that in 2013, he had no interest in electric cars. He accompanied his friends to watch Tesla at Beijing Qiaofufang Grassland Shopping Center, paid a deposit of 500,000 yuan on the spot, and ordered two Tesla Model S at that time. At that time, the electric vehicle brand from Silicon Valley had just knocked on the door of China, and the first Tesla-operated store in China was soon to land. The stores opened in large high-end shopping malls in first-tier and second-tier cities have huge passenger flow, attracting a group of fans with strong economic strength. Many early car owners in other cities even made special trips to Beijing to see car reservations.
In Tesla’s trajectory to ordinary people’s homes, it is not difficult to see the a similar strategy of Apple. The responsibilities that early stores need to undertake are not just sales, but more to educate users to help them understand the technology, safety and communication process of how to use electric vehicles. Even in the early days of encountering legal proceedings initiated by dealers, Musk has firmly opened offline stores and service centers and has never flinched. In the following years, Tesla’s domestic direct stores have appeared in East China, North China, South China, Central China, Southwest, Northwest, and Northeast China.
Up to now, Tesla has opened a total of 58 experience stores and exhibition halls in Beijing, Shanghai, Guangzhou and Shenzhen. Among them, the number of stores in the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen were 10, 11, 5, and 5 respectively, accounting for 53% of the total.
On June 16, Tao Lin, the vice president of Tesla, announced the plan to enter Tesla’s central city and will complete the goal of adding 45 stores in 45 cities in four directions: “Southeast, Northwest” in 2020. After the implementation of this plan, the Tesla Experience Center will be located in 34 provinces and municipalities across the country, and even include third-tier cities such as Weifang, Jiangmen, Zhenjiang, and Yancheng.
It is foreseeable that lowering the threshold of experience is expected to bring Tesla a substantial increase in sales. According to Shen Wanhongyuan’s research and calculation, if 45 cities successfully open experience centers, it can bring an incremental contribution of 4,000 to 4,500 vehicles per month to Tesla China. Superimposing the current monthly sales level of 9,000 vehicles, we can eventually achieve sales of about 13,000 vehicles per month.
In the opinion of a senior person in the automotive industry, the offline network is a major way for the life cycle services of auto companies, and it is also the key for new car manufacturers to find the next growth point after bidding farewell to early seed users. According to the data on the amount of insurance of the First Electric Research Institute, from January to April this year, domestic Teslas insured a total of 20169 vehicles, of which the amount of insurance on the North, Shanghai, Guangzhou and Shenzhen accounted for 57.5%, and the offline store area Model 3 was not opened. The delivery volume is 10%.
New Auto Brand Playing Catch-Up
Not only is Tesla accelerating its offence in it distribution network, many other new car-making forces are also planning on their respective substantial expansions.
On July 9, LiXiang Motors announced that the June sales of the Ideal ONE were 1,891 units, and the cumulative sales since its delivery in December last year reached 10,677 units. However, compared with the data of 2,148 vehicles in May, the sales volume of the LiXiang ONE showed a downward trend.
The company representative said that the original orders have been digested in June. In the transition period of digesting old orders and acquiring new users, “we are still stable, this is also a necessary stage.” .
In mid-June, LiXiang Motors held a delivery ceremony for the 10,000th LiXiang ONE user. The above-mentioned sources said that the next year’s growth will depend on network expansion. LiXiang Motors plans to add 60 stores by the end of this year, and there are currently 21, of which 6 are newly opened in May and June this year.
In April of this year, Li Xiang, CEO of LiXiang Motors, revealed to the media that the newly-built car passed up to about 10,000 seed users in the early days, and the next focus will be on how to attract more new users. Laying more offline channels and getting more new orders has become an ideal priority.
It is worth noting that after being officially classified in the “plug-in hybrid” category in April this year, the number of insurance coverage of the LiXiang ONE in non-restricted cities has exceeded that of the restricted cities. This also means that, in addition to the compromise guided by the policy, in many non-licensed cities, the LiXiang ONE still has a lot of room for growth.
This also makes the LiXiang car that has always advocated open source and throttling and desperately compressed the operating cost of the experience store to invest more funds in the construction of offline stores.
3 Reaons LiXiang Motors are Investing in Physical Dealerships
First, based on real market feedback, LiXiang Car found that if a city has a LiXiang dealership, the market share of the two differed by 8 times. “This means that physical stores can greatly increase car sales.” The second is to push back based on the previously planned strategic plan for the next five years. Ideal cars need to achieve this goal this year. Third, according to the actions of competitors, the LiXiang car needs to regain the initiative and corresponding resources for competition.
Li Xiang recently said that the reason for the substantial expansion of the channel this year was to adjust the plan to open 20 new offline stores to add 60 new stores, because “we found a problem when the customer satisfaction is very high after the new car is delivered. , 20 stores means giving the ’enclosure’ opportunity to competitors.”
“For example, we can only open 20 stores to achieve this year’s original goal, but if the opponent’s growth is 2 times, it is equivalent to your negative growth. Once the opponent gains a competitive advantage, it will take the best resources, suppliers Resources, user resources, media resources, channel resources.”
As early as January of this year, NIO Auto put the channel layout and plan on the agenda. As of January, Weilai has established 22 NIO Houses and 55 NIO Spaces in 57 cities, and plans to expand the total number from the existing 77 to about 200 by the end of 2020. Li Bin, chairman, founder and CEO of NIO, once said: “The move to increase Weilai’s space will help us to effectively increase the number of sales outlets in a more efficient manner, and thus continue to increase the number of orders.”
On May 1st, Xiaopeng Automobile opened 17 offline stores in 11 cities across the country, including Beijing, Shanghai, Shenzhen, Xiamen, and Yancheng. According to the plan, Xiaopeng Auto’s national sales and service network will cover 166 stores in 57 cities by 2020.
The CEO of Weltmeister has said that the brand is currently sprinting towards the goal of 200 stores, and the future plan is “Thousand City and Thousand Stores”.
After more than ten years of investment, the major auto brands in the luxury car market, led by BBA (BMW, Mercedes-Benz, Audi), already have a very large distribution base. According to Shen Wanhongyuan research data, as of the end of 2019, BBA combined has a total of 1,700 dealer outlets nationwide.
What we are seeing is that the new emerging auto brands have accelerated opening physical stores to expand brand presence, the traditional brands are investing heavily online to make car ownership experience more digital. It will be really interesting to see in the next 5 years on how these two forces will pan out.
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