SHANGHAI, Oct. 15, 2021 /PRNewswire/ -- Cango Inc. (NYSE:
CANG) ("Cango" or the "Company") is issuing a bi-monthly industry
insight publication called "CANGO Auto View" to bring readers,
drivers and passengers up to speed on the automobile market's
emerging trends.
Below is an article from the Company's 5th edition for
September 2021.
With Tesla's introduction of the direct sales model and new
energy vehicles (NEVs) driving sweeping change across the entire
auto industry, traditional 4S dealers are struggling to adapt and
remain competitive while trendsetting manufacturers look for brand
differentiators. The direct sales model offers opportunities for 4S
stores to leverage their strengths as resellers, service providers
and more, while its pioneer integrates a more traditional strategy
to increase profits.
Used NEVs: a cash cow for 4S stores
With the entire industry focused on NEV innovation, an
incredibly important aspect of the NEV market is consistently
overlooked – used NEVs. NEVs are widely known to have a relatively
low value retention ratio, but the sales margin of used NEVs in 4S
stores is generally higher than that of traditional gas-powered
vehicles. According to 4S dealers, the profit margin of a
second-hand NEV, which is roughly calculated by using the listed
purchase and sales prices, is usually above 15%. This holds true
among many brands – dealers including BYD, Weltmeister,
GAC AION and Chery all claim that
although there is a limited amount of used NEV sales in their 4S
stores, the profit per car is quite high.
Market surveys reveal that demand for pre-owned NEVs is actually
much greater than expected. Many NEV dealers said that they have
sold most of their second-hand NEV stock (acquired through
trade-in) to retail customers, leaving only a small portion to sell
wholesale to car rental companies or online used car transaction
platforms.
Most of the second-hand NEVs on the market are three to five
years old. Early NEV models have a short battery life, usually less
than 300 kilometers. Given the enhanced battery life of new models,
the residual value of these second-hand cars has declined rapidly.
They typically sell for half or sometimes as little as 20-30% of
the original price, creating an enticing opportunity for
traditional dealers to purchase them from trade-in customers very
inexpensively and resell them for a handsome profit.
Now that many NEV manufacturers have introduced lifetime
warranty policies, customers no longer need to worry about the
quality of pre-owned 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
apply to the purchase of a new model. The used car's residual value
will be determined by the dealer and reviewed by a third-party
agency, after which the manufacturer will reimburse the dealer for
any price difference.
Because demand for used NEVs is far greater than supply, there
is no need to improve upon the current sales model to boost sales.
The amount of used NEVs available in dealerships through
replacement programs is far from being able to meet market demand.
This is still a blue sea market. However, automakers remain open to
new sales models. A NEV brand manager under a traditional car
manufacturer group said that they will consider all kinds of new
sales strategy, whether direct sales, a dealership model, or an
advanced new idea.
Tesla: taking a page from the traditional sales model to
increase profits
Faced with the ever-changing auto 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 for
"store + repair shop," comparable to traditional 4S stores. It also
intends to reduce the number of shopping mall experience stores in
first tier cities and build more 4S-style outlets in areas where
auto dealers are traditionally located to improve its sales and
after-sales service capabilities.
Tesla has already approached investors in traditional car dealer
shops and auto business areas with offers to rent their premises,
to build directly-operated "store + repair shop" outlets. However,
these outlets would not undertake the delivery function. Take
Shanghai as an example: although
Tesla operates a number of sales and service outlets there, it
continues to provide most of its vehicle delivery, financing,
vehicle registration, and owner training services at Shanghai's 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 to shift
to the "store + repair shop" model. In the past, Tesla's
after-sales services were conducted by its authorized domestic
service providers, which have a net profit margin of more than 20%.
In Tesla's early days, when it had less control over its parts and
components procurement channels, after-sales service profits were
even higher. This change will allow Tesla to conduct and profit
from its own after-sales 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 auto purchasing process, providing consumers with integrated
services encompassing consultation, test drives, interaction, and
delivery. Dealers must adapt to industry changes and leverage their
existing strengths to remain profitable. Tesla and other NEV brands
will continue to adjust and perfect the processes and systems in
their operations, keeping an open mind to with respect to advanced
and innovative sales models. Regardless of sales model, branding
and services will remain centric to customer attraction,
satisfaction and retention.
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
China's automotive finance
industry, the Company is headquartered in Shanghai and engages car buyers through a
nationwide dealer network. The Company's services primarily consist
of automotive financing facilitation, car trading transactions, and
after-market services facilitation. By utilizing its competitive
advantages in technology, data insights, and cloud-based
infrastructure, Cango is able to connect its platform participants
while bringing them a premium user experience. Cango's platform
model puts it in a unique position to add value for its platform
participants and business partners as the automotive and mobility
markets in China continue to grow
and evolve. For more information, please visit:
www.cangoonline.com.
Media Contact:
Juliet Ye
Cango Inc.
Tel: +86 21 3183 5088 ext.5581
Email: pr@cangoonline.com
Twitter: https://twitter.com/Cango_Group
View original
content:https://www.prnewswire.com/news-releases/cango-auto-view-synergies-of-the-traditional-and-direct-sales-models-301401076.html
SOURCE Cango Inc.