Interface News Reporter | Zhou Shuqi
After two consecutive months of poor sales, Xiaopeng Motors has once again taken action on its channels. Financial media reported later that Xiaopeng Motors has recently begun to require dealers to reserve inventory and purchase half of the target sales of vehicles every month.
Xiaopeng Automobile dealers and insiders confirmed this news to Interface News. At present, Xiaopeng Motors has not yet presented formal adjustment documents to the dealers, and the dealers are still waiting for the final policy. According to Interface News, the batch sales model is expected to start running from April, and Xiaopeng Motors is helping dealers obtain loans from banks.
As of the time of publication, Xiaopeng Motors has not yet responded to the request for comments on Interface News.
Since Wang Fengying, the former president of Great Wall Motors, joined Xiaopeng Auto, this new force carrying Internet genes has frequently adjusted its channels and gradually returned to the traditional dealer system.
Interface News once exclusively reported that last year, Xiaopeng Automobile adjusted its sales regions multiple times, cut off its original profit chain, and launched the "Jupiter Plan" to gradually eliminate inefficient direct operated stores and expand its dealer scale.
The latest adoption of the batch sales model is Xiaopeng Automobile's third major change in the channel in a year, and its fundamental purpose is still to sell more cars. According to a later report, Wang Fengying believes that dealers sell multiple brands of cars at the same time, while other brands have inventory. If Xiaopeng Motors does not give dealers some inventory pressure, they may not sell their cars at full capacity.
The advantage of stocking up with dealers is that Xiaopeng Motors can quickly collect payments, make up for insufficient funds, and also facilitate the production schedule of Xiaopeng Motors. These are the two most obvious weaknesses of Xiaopeng Motors currently. After the launch of the Xiaopeng G6 in June last year, some models had a delivery cycle of up to 12 weeks, resulting in a loss of orders in the later stage. The new car Xiaopeng X9, which was launched in January, is now also facing production capacity bottlenecks.
Zhu Kai, General Manager of Jielan Road, a market consulting company, pointed out in an interview with Interface News that after Xiaopeng Motors adopts a batch sales model, its requirements for regional management will also change, emphasizing more on sales oriented results.
"The regional management of direct operated brands is considered from multiple dimensions such as sales volume, user satisfaction, and profitability. In the traditional dealer batch sales model, the goal of regional leaders is to strive for more resources such as event budgets to help dealers sell their cars well. Sales leaders of traditional automotive companies, represented by joint venture brands, have a significant role in coordinating dealer relationships."
A hidden risk is that adopting a batch sales model often requires synchronously increasing the rebate ratio to dealers, which can to some extent damage the gross profit level of automobile manufacturers. In the first three quarters of 2023, the gross profit margin of Xiaopeng Automobile's automotive sales business was -6.1%, ranking last among the newly listed car manufacturers and weaker than market expectations.
For dealers, compared to the agency model without inventory pressure and financial costs, returning to the batch sales model means bearing financial and inventory risks. Once sales are difficult to increase or in a long-term loss situation, dealer investors may choose to withdraw from the network.
Zhang Yichao, Partner of Automotive Consulting Business at AlixPartners in Greater China, stated in an interview with Interface News that stocking up on dealerships can help manufacturers share financial pressure. In the past, when the car market was good, dealerships were naturally willing to think about how to mention cars. But if the car market is not good, the pressure on dealers will be even greater.
"In the long run, it still depends on whether the subsequent products can be accepted by the market. If the acceptance is high and the sales are good, cooperation with dealers can form a virtuous cycle. If the sales are not good, dealers' complaints will be even greater, and subsequent low-priced sales or online returns may occur."
However, a senior industry insider who focuses on terminal channels told Interface News that this also helps Xiaopeng Motors make a two-way choice. After early dealers with insufficient strength are eliminated, there will still be new dealers willing to join.
According to a report released by the China Association of Automobile Dealers, the inventory warning index for Chinese automobile dealerships in February this year was 64.1%, an increase of 6.0 percentage points year-on-year and 4.2 percentage points month on month. The inventory warning index is above the boom bust line, and the automotive circulation industry is in a recession zone.
In addition, several market analysts have pointed out to Interface News that under sales pressure, terminal prices may become unstable, and dealers may reduce prices to promote sales. Previously, when two management teams of Xiaopeng Motors were responsible for direct sales and authorized franchise models, there had been terminal price chaos and vicious competition in stores.
Xiaopeng Motors still requires dealers to sell cars at a unified price and has strict management measures for terminals. The implementation of the batch sales model will further test the sales system management level of Xiaopeng Motors. During the era of Great Wall Motors, Wang Fengying was able to manage dealer channels with minimal resources, even achieving the same level of service as direct stores.
Analysts speculate to Interface News that in the future, Xiaopeng Automobile's directly operated stores may only retain image stores and further delegate power to dealers.
Since the beginning of this year, Xiaopeng Motors has not maintained the continuous increase in sales last year, with a cumulative sales volume of 12795 units in the first two months. Affected by the Spring Festival holiday, Xiaopeng Motors sold 4545 units in February, falling to the lowest level in 23 months.
The difficulty in maintaining long-term sales momentum for new car models has been a problem that Xiaopeng Motors has been unable to solve. After maintaining sales of over 8000 units for three consecutive months, the Xiaopeng G6 has dropped to less than 2000 units. At present, Xiaopeng Motors has continued to implement price reduction measures at the terminal, with the starting price of G6 dropping to 189900 yuan.
An insider from Xiaopeng Motors pointed out to Interface News that the company's frontline combat team lacks combat effectiveness and has problems in incentive mechanisms and management systems. Another former middle-level employee of Xiaopeng Motors told Interface News that Xiaopeng Motors lacks systematic marketing capabilities. "For example, in order to achieve the target sales volume, there is no way to obtain leads, arrange outreach activities, invite test drives, or convert orders."
Whether the sales model can ultimately increase sales is closely related to the allocation of sales personnel, cooperation with business policies, and the ideas of the car manufacturer itself. Both direct sales and dealer routes require car manufacturers to shoulder the responsibility of acquiring, converting, and cleaning more sales leads.
The evolution from direct sales to agency to distributor model is a historical evolution of specialized division of labor. With a wider coverage of sales areas, the professional division of labor in the dealer model can improve efficiency, but the downside is that the speed of insight into consumer information slows down. New energy vehicles are going through this process, but no matter which model is chosen, the manufacturer ultimately needs to establish their own sales capabilities, and this part of construction is difficult to achieve overnight.