Special Report

November 27, 2014

Dealers should adapt to diverse ecosystem

With the increasing amount of driving vehicles, competitions seem to be more dramatic, growing numbers of Internet applications as well as independent repair chains appear in the market. China Automobile Dealers benefit from the sales of new cars and repair services are also available from the high profits in this process. How should dealers confront the transition? The following four guests well expressed their perspectives: Hu Bo, chief marketing officer of Volkswagen China and the ASEAN region; Liu Zhifeng, EVP of Beijing Hyundai; Wu Gang, Managing Director of the Sinomach Automobile Co. Ltd., and Bill Russo, Founder and President of Synergistics Limited. They discussed on the relationship between the Internet E-commerce and existing sales channels, take advantage of big data technologies, from ‘product economy’ to steer ‘customer economy’, standard second-hand car market and other relative aspects.

Wu Gang: Suning, Gome have huge impacts on the dealers

In terms of the biggest change of government regulation to the automotive industry should be from the front stage to the rear, with stronger focus on the use links. Following the constant change of policy and technology, traditional dealer’s business model will be challenged from the Internet. Once the dealers can access the sources, the Internet-based companies will become the 4S shop killer, as Suning and Gome will be the biggest competitors to 4S shops. In the long run, in the field of chain operations into the field of automobile will trigger a high shock to 4S shops.

In addition, Wu Gang said: domestic parallel importers mainly set up showrooms in big mainland cities and operate multi-brands business, which has brought threats to imported cars; Shanghai has basically approved this year and Tianjin is possible to obtain qualifications from the parallel import policy in the long run, which will form a relatively large impact on the market. Moreover, new energy vehicles of the future will help car dealers to a large extent, majority of which will adopt new sales model to promote, for example, Tesla.

In short, the auto 4S shops still survive, while using the Internet instead of trading transactions in 4S stores will take a very long time. Therefore, it is highly recommended to embrace these changes and actively explore new business under unauthorized system.

Liu Zhifeng: Existing distributors and E-commerce will coexist for a long time

The current car is facing new “two micros” normalization, namely micro sales growth and micro profits. New solutions meet new conditions: First, dealers should make the transformation of mind and repositioning. Second, the business model aspects need restructuring to regulate the dealer’s business model, the information must be standardized and more transparent and the upgrade should be highlighted from the perspective of consumption. While more refined management are required. Third, the profit model for transformation.

On the profitable model of transformation which should be: 1. Adapt to the new situation of antitrust, upgrade the original management system. 2. Break new areas. For example, a second-hand car dealer is the major point of future growth; second-hand car dealers should seize the opportunities. 3. For the acceptance of the new model, as the manufacturer is concerned that the Internet is a channel and platform, while the dealers provide a good platform as well. To create better customer experience, the manufacturers are suggested to develop both platforms effectively. Regardless of who is leading the future, both of them will coexist for long-term.

Hu Bo: Stores are confronting new challenges

Internet retail sales are menacing. Data shows that 80% of 80s and 90s do shopping online at least once a week; with the popularity of paying via mobile, the Apps on mobiles seem to be trendy and will spread positively. This demonstrates that the auto E-commerce has great potentials of development and will reach a high growth phase. How should dealers respond to the situation?

First, the Internet has brought changes in marketing, while dealers have to rethink their position. With the rise of E-business platform, it is a must-discuss issue about which kind of E-platform should establish, as well as what roles should manufacturers and dealers play in the new platform?

Second, how should dealers combine their experience of brand and also the virtual experience online? Autos are high value-added products; majority of consumers would purchase them only after test driving. However, we cannot underestimate the impact of the online sales, in particular, virtual reality technology. In the future, the pros of dealers will not merely be limited to real 4S stores, but also the Internet, as long as they embrace the Internet and uses achieve the lifetime value of customers to the fullest.

Bill Russo: To participate in diverse ecosystems

At present, China’s sales network is very fragmented, 80% of turnovers and 50% of the profits for the Chinese dealers are from selling new cars; while in the US, 80% of the profits are from car maintenance and half of the profits are from the sales of second-hand cars. This is a great service opportunity for dealers to get involved in a variety of ecosystems.

Now the car’s ownership is very large with plenty of space for improving services. In the future sales market, new cars will hold approximately 7% of growth rate. Thus, the growth rate of after-sale services market may even be faster than the new car sales market, which identify that services will become a core element of dealer development.

-Published on pages#34-35, November-2014 edition of MOBILE WORLD Magazine

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