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Xiaopeng Automobile finally Decide to Replace some Inefficient Sony Store with Distributors

Latest company news about Xiaopeng Automobile finally Decide to Replace some Inefficient Sony Store with Distributors

In recent years, the new force of car manufacturing led by Tesla has not only changed people's travel habits, but also changed many consumers' consumption habits through its direct stores in urban commercial districts. Now, brand image stores such as new energy vehicle direct stores and urban center stores are gradually shifting from brand standard to commercial district standard. However, although the direct Sony Store may seem tall and upscale, the significant investment is also a headache for new energy brands that urgently need to make profits. Therefore, Xiaopeng Automobile is starting to replace the direct stores with dealers.


Xiaopeng Automobile finally Decide to Replace some Inefficient Sony Store with Distributors


Recently, according to domestic media reports, Xiaopeng Motors has recently reduced its 24 sales regions identified in March to 12 nationwide, and is gradually phasing out inefficient direct stores and expanding the size of its dealerships.


According to reports, Xiaopeng Automobile held a channel business meeting in early September and announced a channel change plan called the "Jupiter Plan". This plan is being promoted by President Wang Fengying, aiming to gradually replace the previous direct sales model with a distributor model to reduce operating costs and increase market coverage.


In order to verify the authenticity of the message, "Auto Pull Talk" consulted multiple direct stores of Xiaopeng Automobile in Beijing. The store staff stated that they have not received any notification yet, and all sales in the store are normal. However, they also stated that if there is no urgent need to buy a car, they can continue to pay attention. In the future, there will be room for negotiation of prices in the store with uncertain dealer models.


The direct sales model has advantages and disadvantages


The direct sales model has both advantages and disadvantages for manufacturers. Although it can improve the overall brand image, facilitate unified management, and avoid price wars for inventory clearance, it also brings huge financial pressure, continuously consuming the manufacturer's cash flow from store establishment to operation.


In the case of sufficient cash reserves, by predicting the market and sales, vehicles can continue to be sold in a direct sales model, but if sales are not good, it will become a "drag on" in financial reports.


Xiaopeng Automobile finally Decide to Replace some Inefficient Sony Store with Distributors


Xiaopeng Motors sold 13690 units in August, with a total of 440 stores, resulting in an average sales volume of less than 32 units per store; It is difficult to maintain direct sales without losses, and the sales of each brand in different regions can vary significantly. Some stores can only sell three to five units in a month, which will inevitably result in losses. Therefore, adhering to the direct sales model is not meaningful.


At the beginning of this year, the proportion of Xiaopeng Automobile's direct sales model was 70%. At the second quarter financial report conference call this year, Xiaopeng Automobile Chairman He Xiaopeng once stated, "We need to carry out a drastic survival of the fittest in the sales network, and introduce excellent dealer partners at a faster pace to accelerate market share expansion in second and lower tier cities

Xiaopeng Automobile finally Decide to Replace some Inefficient Sony Store with Distributors


According to reports, Xiaopeng Automobile is conducting channel optimization, closing some poorly managed direct stores, gradually increasing the authorization ratio, and introducing more dealers to third and fourth tier cities. According to the recruitment conditions for authorized dealers announced on the official website of Xiaopeng Automobile, the registered capital of the authorized operating company for agent dealers shall not be less than 10 million yuan, and the annual operating revenue of the automotive business sector shall be over 100 million yuan. The investment store needs to be located in the mainstream automotive shopping district of the city, with an actual usage area of no less than 1000 square meters, and a sales exhibition hall area of no less than 300 square meters.


What are the benefits of replacing direct sales with distributors?


As a representative of the new force in domestic car manufacturing, Wei Xiaoli's days today are also vastly different. In the second quarter of this year, Ideal has achieved three consecutive quarters of profitability. And NIO's loss further expanded, with a net loss of 6.056 billion yuan, an increase of 119.6% year-on-year. Xiaopeng's losses are also intensifying, with a net loss of 2.8 billion yuan in the second quarter.


Liu Qiang, a researcher in the automotive industry, stated that Ideal is the first to make profits, on the one hand because its adoption of incremental programming technology has obvious advantages in the market, and on the other hand, Ideal strictly controls cost management. Over the years, Ideal has strictly controlled costs in all aspects, from research and development to production and sales, all with meticulous planning. In the current fiercely competitive automotive market, cost control is also an important competitive advantage, and it is ideal to maintain competitiveness and achieve sustained profit growth through this approach.


xiaopeng replace ineffecient  direct stores with distributors


So in order to achieve profitability as soon as possible and in the absence of a quick solution to reduce costs, both NIO and Xiaopeng mentioned "channel sinking" during the second quarter financial report conference call. Everything is prioritized by scale, after all, with sales, everything will come true.


Considering that it is not realistic to establish direct stores across the country and that the decline of direct stores is too slow and expensive, it is better to introduce distributors and quickly cover more markets with the money of investors.


Data shows that as of 2023, there are a total of 293 prefecture level cities, 388 county-level cities, or 681 cities in China. If we want to achieve one city, one store, the investment in store construction alone is an extremely large number that most car manufacturers cannot afford. So direct stores cannot be spread to every corner, and to fully cover the 1-4 level market, we must rely on third-party enterprises.

Xiaopeng Automobile finally Decide to Replace some Inefficient Sony Store with Distributors

The dealer authorization model can effectively control the cost investment in the automotive sales process, and can accelerate brand promotion and sales increase based on the brand awareness of its local dealers. At present, BYD and GAC Aian are able to become leaders in the new energy industry. On the one hand, their products have high cost-effectiveness, and on the other hand, they have a large number of distributors across the country. Once new products are released, they can directly reach third and fourth tier cities. This is currently something that many new car manufacturers cannot do, and it is also the key for the two to quickly increase their volume.


Early new energy vehicles, as a novelty, the direct sales model can provide a consistent standard service experience and achieve unified price control. However, with the increasingly fierce market competition environment, the drawbacks of the direct sales model's heavy asset operation are gradually becoming prominent. Nowadays, with the increasing penetration rate of new energy vehicles, reducing the number of direct stores and expanding the scale of agent dealers is becoming a new industry trend.

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For Xiaopeng Automobile, gradually replacing the direct sales model with the dealer model can reduce operating costs on the one hand; On the other hand, it can expand into a new market, better reach new users, and achieve sales growth. At present, in addition to Xiaopeng Automobile, new forces such as NIO and Geely Krypton are also undergoing similar channel adjustments. For these new forces, their brand image has been established now, and it is also time to go to third and fourth tier cities to reap more incremental benefits.