Author | Zhen Yao
Edit | Li Guozheng
Produced by | Bangning Studio (GBNGZS)
After 20 days of struggle, Guanghui Automobile, the former largest passenger car dealership and service group in China, finally failed to avoid the fate of suspension of trading.
On the evening of July 21, 2024, Guanghui Automobile issued an announcement announcing that it had received the "Prior Notice on the Proposed Termination of the Listing of Shares and Convertible Corporate Bonds of Guanghui Automobile Service Group Co., Ltd." issued by the Shanghai Stock Exchange.
As the daily closing price of the company's shares was below $1 for 20 consecutive trading days, triggering the conditions for termination of listing, the SSE issued the above notice accordingly. This announcement indicates that Guanghui Automobile is only one step away from permanent delisting.
The suspension of Guanghui Automobile has caused an uproar in both the capital market and the automobile market.
On the one hand, as a large-scale, among the best in the domestic automobile sales industry, Guanghui Automobile was profitable last year, and although its performance has declined this year, the company is actively adjusting its layout and striving to reverse the situation.
In 2023, Guanghui Automobile's total revenue will be 137.998 billion yuan, and the total sales volume of automobiles (including used cars) will be 713,400 units. As of December 31, 2023, it has established a nationwide automobile dealership network covering 28 provinces, autonomous regions and municipalities directly under the central government, operating a total of 735 business outlets, including 695 4S stores, demonstrating its huge market layout and strength.
▲Guanghui Automobile Sales Brand (Partial)
However, Guanghui Automobile has recently fallen into the turmoil of store closure, and has been exposed to problems such as arrears of wages and difficulty for car owners to pick up their cars.
A series of events show that in the face of the intensification of involution in the automotive industry, the interest of capital in auto dealers has decreased significantly.
On the other hand, with the continuous changes in the domestic passenger car market, more and more car companies are innovating their marketing models, and the popularity of the direct sales model is accelerating, which squeezes the living space of dealers. The suspension crisis of Guanghui Automobile shows that China's auto dealership industry is experiencing an existential crisis, suggesting that the traditional 4S store business model is gradually declining.
Before Guanghui Automobile, there have been some listed car dealerships that have been delisted, or the stock price has plummeted and become "penny stocks".
In June this year, Jiangsu Senfeng Group was in trouble, and the boss Shen Feng lost contact, the group was the largest car dealer in Yancheng, Jiangsu, and the agent brands include Lincoln, Audi, Wenjie, Buick, Beijing Hyundai, etc.
At the beginning of this year, Guangdong Yongao Group encountered a serious business crisis, and more than 80 of its 4S stores suspended business, suspended the delivery of new cars, and finally announced the closure of business.
In June last year, the huge automobile, once known as the "king of 4S stores", was delisted from the Shanghai Stock Exchange......
The latest industry case, Guanghui Automobile, landed on the A-share market in June 2015, and in the past 10 years, this dealer group has gone from rise to decline, reflecting the changes of the times in the automotive industry. During this period of time, the new wave of automobiles crashed on the shore, and the automobile dealership industry danced with it, which was not only lifted to achieve a moment of glory, but also crushed and squeezed to the edge of life and death.
However, it is not the competitors who beat Guanghui Automobile; What really disrupted the entire car dealership industry was the innovative thinking brought about by the development of new automobiles.
From peak to trough
On March 26, 1999, along with the first Accord car off the assembly line, Guangqi Honda opened the "Guangzhou Honda Automobile First Special Sales and Service Store" in Baiyun District, Guangzhou. The first 4S store in the history of China's automobile development was born.
The 4S store integrates sales, spare parts, after-sales service, and information feedback. At that time, for Chinese automobiles, 4S stores were a new business model. Based on this, dealers mainly carry out four major businesses: new car sales, after-sales and parts, used cars, and financial derivatives.
"After 1998, under the call of national policies, automobiles officially entered people's homes as consumer goods." Yan Jianming, general manager of GAC Commerce, once recalled that before this, automobile sales mostly implemented the separation mode of sales and after-sales, which exposed many drawbacks and loopholes.
In the take-off of China's automobile industry, the establishment of the 4S store model has made great contributions, and for more than 20 years, this model has become the best bridge between automobile manufacturers and consumers, and is the most important sales channel in the field of automobile circulation in China.
After the rise of 4S stores, it soon became a dazzling industry, and a number of listed companies were born successively.
To sum up, in the context of the times and fierce competition, the development process of China's auto dealer group can be divided into three stages.
The first stage was from 1999 to 2008, and the dealers mainly adopted the development path of scale expansion from a single store to a group, and the core of development was rapid expansion of scale.
The second stage is from 2009 to 2018, which is the intensive listing period for dealers. In 2010, Zhongsheng Group became the first listed company with 4S stores. The dealer industry began to shift from extensive to refined management, which became the core of dealer business development.
The third phase is after 2019. At this stage, information technology and new retail have driven the automobile dealership industry to explore new business models. Dealers have shifted from selling products and services to creating value for customers, tapping customer value and reshaping the best customer experience by operating a full-chain network.
2018 was a year of turning and change for the auto dealer industry, when they began to encounter major challenges - that year, China's auto sales for the first time in 28 years showed negative growth, the number of outlets, operating income, gross profit margin, net profit margin and return on equity of the entire top 100 dealer groups declined, and the industry began to shift from rapid development to structural adjustment.
In 2023, the number of 4S stores will increase to 33,800, a year-on-year increase of 0.6%, and the growth rate of the distribution network will slow down significantly. Among them, the number of independent channel networks for new energy vehicles was 18,900, with a growth rate of 18.9%, and independent brands occupied an absolute advantage, with a share of more than ninety. These independent channels for new energy vehicles are specific to the format, and nearly half of the exhibition halls or experience centers with sales functions are no longer the mainstream of development.
With the rise and penetration of the wave of new energy vehicles, the market share of fuel vehicles has been continuously squeezed out, and at the same time, the new car forces and the new energy brands of traditional car companies (commonly known as "new strength" or "second generation") have implemented direct sales and direct sales models, and auto dealers have been hit by both sides.
"Before 2010, cars were in short supply and dealers were lying down to make money. From 2010 to 2011, the market supply and demand were balanced, and the profitability of dealers was good. Since 2012, the market has been oversupplied, and the operating pressure of dealers has increased year by year, and the profitability has decreased significantly. Shen Jinjun, president of the China Automobile Dealers Association, once said that the contradiction between the excessive release of the production capacity of the main engine factory and the relative lack of market demand, coupled with the lack of its own business service capacity, is the main reason for most of the losses of dealers.
According to the association's data, in the past four years, more than 8,000 4S stores have completely disappeared; In 2023, 43.5% of auto dealers will lose money, and only 27.3% will achieve their annual targets.
For example, the term "price war" appears many times in the financial reports of listed dealer groups.
In the 2023 financial report, Guanghui Auto mentioned: "Behind the market prosperity, it is also accompanied by fierce competition. In order to compete for market share, the major OEMs have launched a price war throughout the year, resulting in a general decline in automobile sales prices, although it has stimulated sales growth in the short term, but it has had a certain impact on the order of the automobile market and the profits of related enterprises in the industry, especially the automobile dealers at the end of the automobile industry chain, who are forced to bear huge operating pressure. ”
The rise of directly operated stores
The price war in the auto market has seriously impacted the profits of dealers, and the rise of directly operated stores has posed a direct challenge to the brand barriers established by traditional 4S stores.
This stems from the wave of change in new energy vehicles. It not only completely subverts the status of traditional fuel vehicles, but also brings earth-shaking changes to the automobile sales model and channels.
In 2007, Tesla CEO Elon Musk envisioned a unique car sales store that combines the casual atmosphere of Starbucks, the interactive experience of an Apple experience store, and the service quality of "a good restaurant".
This was the initial idea for a new car direct sales model. For this start-up in the field of electric vehicles, both the direct store model and the electric vehicle products play a key role in determining the fate of the company.
In May 2008, Tesla's first directly operated store opened in Los Angeles, the largest city in the western United States. The store not only represents the traditional status of electric vehicles starting to "Zhenggang" fuel vehicles, but also represents a major breakthrough in the entrenched car sales system.
In July 2013, Tesla's first experience center after entering China opened at Parkview Green in Beijing, and Tesla introduced its direct sales model to China.
This has attracted new domestic car manufacturers and even some "new strength" brands to follow suit. The 4S stores, which used to "can't understand and look down on" the direct sales model, soon fell into the embarrassing situation of "too late", and helplessly watched the direct sales stores of various brands spring up like mushrooms after a rain.
On November 25, 2017, the world's first NIO House (NIO Center) was unveiled at the Oriental Plaza at No. 1 East Chang'an Avenue in Beijing, attended by nearly 1,000 NIO users and their friends.
NIO Center is committed to creating an exclusive lifestyle community for users, reflecting NIO's in-depth thinking and reshaping of the automotive user experience.
The first NIO Center occupies two floors and has seven functional areas with a total area of 3,000 square meters. In this space, NIO users can not only brainstorm with their work partners, but also hold sharing sessions, birthday parties, solo concerts, and even hold their own yoga classes with friends.
"Our goal is to create a warm, free and open place for users to make friends. Here, NIO will work hand in hand with users to grow together. Li Bin, founder and chairman of NIO, said on the opening day.
Following NIO, new car-making brands such as Ideal, Xpeng, and Nezha are mainly directly operated, and the sales and service channel network has grown rapidly. After the direct stores of these brands were launched in first-tier and new first-tier cities, they were followed by the improvement of sales channels in second- and third-tier cities.
"The trend is that car companies are more inclined to segment customer groups and pursue omni-channel sales strategies." Lu Fang, CEO of VOYAH Automobile, once said.
At the beginning of the brand's establishment, VOYAH clearly chose the direct sales model. In terms of offline, it has opened a variety of channels such as VOYAH space, delivery service center, and full-featured user center, so that users can see, buy, and use cars without spending extra time going to 4S stores in the suburbs of the city. Online, VOYAH uses digital tools such as apps and mini programs to quickly respond to user needs.
This direct sales model obviously impacts the traditional 4S store model of dealers. According to the "2023-2024 China Automobile Dealers Industry Development Report" released by the China Automobile Dealers Association, by the end of 2023, the number of independent sales channels established by new energy brands was 18,877, of which the proportion of direct sales increased from 22% in 2022 to 30% in 2023.
This means that the number of directly operated stores of new energy vehicle brands is approaching 6,300 and growing. In contrast, the number of traditional 4S stores has accelerated its contraction.
Today, however, the two models are competing.
In the first half of 2024, under the dual challenges of fierce competition in price wars and sales pressure, many new energy vehicle companies will make in-depth adjustments and changes to their sales channels.
On the one hand, they began to gradually expand the traditional distribution model in addition to the direct sales model that they initially valued. AVATR made it clear that except for a few core cities that retain directly operated stores, it will gradually abandon the direct sales model in second- and third-tier cities and adopt the dealer model.
Similarly, ZEEKR has also launched a recruitment plan for dealers "ZEEKR Home", Wenjie is actively developing a dealer system, and NIO's sub-brand "Ledao" also plans to introduce dealers to set up separate stores.
On the other hand, traditional car companies have established independent direct sales channels for their new energy sub-brands.
Great Wall Motors is a representative. On May 1 this year, the first batch of 33 retail centers in China were opened, including 17 first-tier and new first-tier cities, such as Chengdu, Guangzhou, Hangzhou, Shanghai, Wuhan and other places.
In the second quarter of this year, more than 100 retail centers will be opened, and more than 200 by the end of the year, with the goal of covering the new energy vehicle market in key areas. However, these retail centers currently only sell two brand products, Tank and WEY brand, and Haval is not among them.
"All brands are exploring channel changes, whether it is a new force or a traditional car company, their actual channel model shows some ambiguity." Lang Xuehong, deputy secretary-general of the China Automobile Dealers Association, has said that the rapid development of the new energy vehicle market has led to the rapid expansion of the channel network.
Between advance and retreat, the field of automobile circulation has experienced industry fission and profound changes in its operating model.
From the perspective of the development history of traditional dealers, since 1999, the industry has expanded rapidly from a single store model to a group scale, and then began to be listed in 2014, and then entered a trough stage after 2018, until 2024 encounters a thunderstorm.
In the past 20 years, dealers have not only witnessed the ups and downs of China's automobile industry, but also experienced the continuous evolution of the sales model and pattern in China's automobile circulation field.
From the perspective of OEMs, from the traditional 4S store distribution model, to the exploration of the direct sales model, and then to the dual-mode operation of direct sales + 4S stores, car companies are constantly seeking the most optimized sales and service paths to meet the escalating needs of consumers for car purchases.
Whether it is for dealers or car companies, in the final analysis, embracing change, close to and embracing consumers is the way to survive in the continuous change of the industry and the fierce competition in the market.
Resources:
(1) "2023-2024 China Automobile Dealers Industry Development Report", China Automobile Dealers Association
(2) "8,000 Closures in 4 Years, Who Killed the 4S Store?" China Business Towers, July 2024
(3) "China's Largest 4S Group Fails to Save Itself, Multiple Car Companies Change Their Channels, and the Penetration Rate of New Energy Vehicles Exceeded 50%," Auto Service World, July 2024