"Back to the water", Xiaopeng returned to the distribution model?

China Foundation News reporter Feng Yao

"We are currently only recruiting for 4S stores, and the current conditions for joining are at least three 4S stores with operating experience," a channel source from Xpeng Motors told reporters.

Recently, it was reported that at the channel business meeting held in early September, Xpeng Motors announced a "Jupiter plan", the core of which is to gradually replace the previous direct sales model through the dealer model (that is, the car 4S shop model). The reporter verified with Xiaopeng through multiple channels. But by time of writing, the company had not responded.

However, the reporter received an affirmative reply from the above-mentioned channels of Xiaopeng, which hammered the strategic change of Xiaopeng to return to the distribution model.

In the industry's view, Xpeng's move is intended to reduce operating costs and improve market coverage. For a long time, new energy vehicle companies have mainly focused on a relatively simple direct sales model, but Xpeng has "bucked the trend" this time. In the face of a more complex dealership model, it will take time to test whether Xpeng Motors, whose profitability is deteriorating and sales are sluggish, can effectively control it.

A major shift in sales models

According to market sources, at the channel business meeting held in early September, Xpeng Motors announced a "Jupiter Plan", the core measure is to gradually replace the previous direct operation model with the dealer model. At the same time, Xpeng Motors reduced its 24 sales areas to 12, phased out inefficient stores, recruited a large number of dealers, and expanded the scale of agency dealers.

It is worth noting that this new force, which is "favored" by the public, has been directly operated + licensed business model. This is also the sales model chosen by many new energy vehicle companies.

For the above news, the reporter contacted Xpeng through multiple channels, but the company did not respond as of the deadline.

In fact, at the second quarter earnings call this year, He Xiaopeng, chairman of Xpeng Motors, said, "We must carry out a drastic survival of the fittest in the sales network, and introduce excellent dealer partners at a faster speed to accelerate market share expansion in second-tier and lower-tier cities." ”

Subsequently, the reporter learned from an internal source of the company that at present, Xiaopeng is indeed only recruiting for 4S stores, and the condition for joining is that at least 3 4S stores need to operate experience. This also supports its shift to a distribution model.

And according to him, most of Xpeng's current first- and second-tier cities have completed recruitment, and the recruitment of some low-level cities is almost complete, because "in general, some low-level cities will only accommodate one new cooperative dealer."

From the official website of Xpeng Motors, the reporter noticed that from its so-called new retail recruitment conditions, the registered capital of the franchised company is not less than 10 million yuan, and the annual operating income of the automobile business sector needs to be more than 100 million yuan. The investment store needs to be located in the city's mainstream automobile business district, the actual use area is not less than 1000 square meters, and the sales showroom area is not less than 300 square meters.

It is worth noting that Xpeng Motors also mentioned on its official website that "acceptable concurrent operation" is acceptable. When asked what "part-time operation" is, the above-mentioned channel sources said that it can be operated jointly with other brands in the after-sales maintenance link. It is not difficult to see that Xpeng Motors has given a more open attitude in terms of mode.

There are many controversies in direct sales distribution

In fact, there is a lot of controversy in the market about the advantages and disadvantages of direct management and distribution models.

A person from a traditional car company told reporters that the automobile 4S store provides consumers with one-stop experience services from sales to after-sales, and more importantly, the 4S store model provides a reservoir of sales and funds for OEMs, and becomes a regulator and buffer zone between automobile manufacturers and market demand fluctuations. "In a sense, that's also why prices are opaque," the person said.

However, compared with the traditional fuel vehicle manufacturers adopting the distribution model, new energy vehicle manufacturers currently generally choose the direct sales model, which is also affected by Tesla.

Since entering the Chinese market in 2013, Tesla has adopted a direct sales model that subverts the traditional distribution model, setting up wholly-owned subsidiaries in cities where directly operated stores are opened, and Tesla China acting as the general agent and authorizing the subsidiary to operate locally.

This model has many followers in China. Li Auto sees the direct route as the key to its success. In the view of Li Xiang, CEO of Ideal Auto, on the one hand, it can better and faster get first-hand consumer feedback on products, so as to improve and upgrade products faster; On the other hand, price and profit control is more effective than agents.

Li Xiang also recently posted on Weibo: "We will not authorize any agents and distributors, and will always adhere to the direct sales model." ”

In fact, Xpeng has also been dominated by directly operated stores in the past. As of December 31, 2022, Xpeng has a total of 420 stores nationwide, covering 143 cities, and the proportion of directly operated stores has reached about 70%. Among the three "Wei Xiaoli" stores, Xiaopeng also has the largest number of stores.

The data shows that Xpeng's sales expenses in 2022 will be 5.029 billion yuan, and its single store sales expenses will be about 11.97 million yuan, which is basically the same as in 2021. A year ago, the number of its stores was 357, corresponding to sales expenses of 4.276 billion yuan in 2021. In other words, Xiaopeng's past cost reduction measures are not obvious.

It is not realistic to maintain direct management

What kind of car companies are suitable for the direct operation model? This is also a topic of concern in the industry.

An auto industry analyst who did not want to be named told reporters that the direct sales model can effectively ensure the service of users, including channel costs, price transparency, test drives, car bookings, etc. However, he also believes that direct management is a "double-edged sword", which not only improves user experience, but also brings huge capital requirements and operational complexity, and it is difficult to balance user experience and cost efficiency.

"The direct operation model can only take advantage of high profits when the market is in short supply, and when the demand is not sufficient, building a large number of direct sales channels will be a serious burden," the analysts said.

Obviously, with Xpeng's current profitability, it is not realistic to maintain a large number of directly-operated stores. According to the data of the report, Xpeng Motors' loss in the second quarter further expanded, with a net loss of 2.805 billion yuan, which also set a record high in a single quarter. Previously, Xiaopeng's highest quarterly loss was in the second quarter of last year, when the net profit loss was 2.689 billion yuan, and the loss in the first quarter of this year was 2.34 billion yuan.

Moreover, the most unexpected thing in the market is the gross margin. In the second quarter of this year, Xpeng's gross margin was -3.9%, which was also the first time that the company's single-quarter gross margin was negative. Prior to this, the downward trend had already been reflected. In the five quarters since the beginning of 2022, this indicator was 12.22%, 10.88%, 13.53%, 8.66% and 1.66%, respectively.

In fact, in the first quarter, Xpeng's gross margin turned negative for the first time, at -2.5%, and in the second quarter, this indicator even slipped to -8.6%. Xiaopeng is also the only new force in the three "Wei Xiaoli" with negative gross profit margins.

How effective it is remains to be seen

However, under this circumstance, is the large-scale distribution model really suitable for Xpeng?

The above-mentioned analysts told reporters that an important reason why the current direct operation model can overwhelm the distribution model is that the relationship between the main engine factory and the traditional 4S store has changed subtly.

"In order to pass on the sales pressure, some automobile brands set unreasonable sales targets for 4S store dealers, and there are market chaos such as forced warehouse pressing, deduction rebates, and bundled procurement, which undoubtedly damages the interests of dealers, and in this situation, dealers will also pass on the cost to end consumers through other channels."

According to data from the China Automobile Dealers Association, only 20% of dealers in the first half of the year were able to achieve the sales target set by the main engine factory, and 31.7% of dealers said that they could only complete more than 80% of the sales task; 11.7% of dealers reported a completion rate of less than 50%.

Therefore, in the view of the above-mentioned people, with a relatively large sales base, dealers will be more willing to cooperate with it. Taking BYD as an example, it has a huge sales base, so it focuses on the distribution model and occupies the market with a "bottom-up" product strategy.

From Xpeng's perspective, it delivered only 66,100 vehicles in the first eight months of this year. In contrast, Ideal has delivered more than 200,000 vehicles, while NIO has delivered 94,400 vehicles this year, and Zerorun has achieved a total of 73,000 vehicles. Combined with deteriorating profitability, Xpeng clearly feels an unprecedented crisis.

A research report by BOCOM International believes that in the fourth quarter, car companies may have more aggressive price reduction promotions in order to catch up with the annual sales target. The agency believes that there is greater uncertainty about Xpeng's sales growth in the fourth quarter and the sequential improvement of gross margin.

In the industry's view, Xiaopeng's reversal to the distribution model at this stage is quite "back in the water", and the final effect needs time to test.

Editor: Captain

Review: Xu Wen