Zooming into a new era for cars

Alternative sales channels emerge, riding industry reform and technology

Everyone knows that e-commerce and modern retail have transformed shop-ping in China, but not many are aware that the same innovative spirit is revving up a revolution in automotive sales in the world's largest car market.

These days, supermarkets are not just for shopping for groceries and household items. You can drive a brand new Maserati, Cadillac, BMW, Mercedes-Benz or Audi off the supermarket shelf.

If that sounds like too much work still, how about going online and ordering a Porsche for express home delivery the next day?

This is not fantasy, but the reality of the world of e-commerce and digital technologies like big data, and a consequence of reform, restructuring and modernization of the auto sales sector.

At Suning Automobile Supermarket in Nanjing, the capital of East China's Jiangsu province, a crowd of curious consumers got a taste of this reality last month as buyers drove off in new cars they had just bought.

In the two days after the car supermarket opened on July 15, more than 30 cars, mostly luxury brands worth millions of dollars, were bought. In addition, buyers picked up automobile parts, car accessories and engine oil.

In doing so, they saved quite a bit, because the prices were lower than those in the traditional market.

The scene was in contrast to the past, when car dealers in China dominated the segment of auto sales.

The manufacturer-dealer nexus was too strong; they could arm-twist the consumer into accepting arbitrarily set prices and other terms and conditions for after-sales service.

Now, new regulations have introduced alternatives and empowered consumers. Coupled with innovative financing for buyers and restructuring of sales channels, the Chinese auto industry is driving into a new era.

The first signs of the change appeared on April 14 when the Ministry of Commerce issued new guidelines for car sales. Under the new regime, auto trading companies can sell vehicles without any authorization from carmakers. The measures took effect in July.

That means both authorized and unauthorized car sales are allowed. Auto supermarkets of the kind that Suning opened in Nanjing, exclusive multibrand car stores and even e-commerce platforms sell cars now in China.

The ministry hopes the new measures will improve sales and after-sales service across different auto brands, an approach that is expected to save resources and boost efficiency.

As if on cue, Suning said it expects to open more than 100 auto supermarkets in first-and second-tier cities in China.

Liu Donghao, head of Suning's automotive business section, told reporters at the Nanjing store opening that the venture marks the starting point of the company's wider car-related business.

Suning's offline and online platforms will cover automobiles, electric motorbikes, automobile electronics, car decoratives, engine oils, rental and used cars. The platforms will deal with buyers directly with no middlemen.

"It's not right to say we have the lowest price. But our pricing is transparent, products offered are diverse and we guarantee quality," said Liu, who is also the president of Suning Digital Co. "The ball is now in the consumer's court."

Suning is collaborating with Ping An Automobile Butler to offer auto financing and insurance services in a one-stop-shop model.

Gome, another major retail player in China, is planning to add a car section at most of its 1,700 stores in the country. The project is expected to start within a year.

Gome's existing stores, usually located in downtown urban areas, record a large foot-fall. So the potential for the upcoming car business is high, said Zhang Haifeng, head of Gome's car business, in a meeting with potential investors in Kunming, Yunnan province, last month.

He said e-commerce alone won't suffice as an alternative auto sales channel, so brick-and-mortar stores are important, too.

Alternative channels need not be seen as competition to existing dealer networks. Instead, Gome's planned auto foray will help both carmakers and dealers to sell cars.

"So, if you think we're going to replace car dealers, then you have misunderstood our business model."

He said Gome is building a system that is open to car dealers and carmakers. It is up to them to decide which car models they will offer to consumers through the new system. But if the new approach gives customers a stronger voice, car dealers and carmakers will naturally offer better-selling products and better prices, Zhang said.

"So, we're not going to fight dealers. Instead, we'd like to invite them over to huddle together for warmth."

Meanwhile, Tmall, the e-marketplace owned by Alibaba, announced plans on July 26 to unveil an ultra-modern real-world garage resembling a snack or beverage vending machine by the end of the year.

Tmall consumers will be able to push a but-ton to select their car and drive away in a jiffy, according to Yu Weixuan, general manager of Tmall Automobile, the division that is driving the garage venture.

Consumers with a good credit score can make 10 percent down payment to buy the car of their choice in 20 minutes.

Sesame Credit, a credit scoring system developed by Ant Financial Services Group, the online finance company backed by Alibaba founder Jack Ma, will use big data to track online shoppers' behavior and payment records to award points. Anyone with over 750 credit points becomes eligible to buy a car at the garage.

For example, a car priced at 150,000 yuan ($22,500; 19,000 euros; ￡17,300) would require a consumer to pay 15,000 yuan toward the down payment and loan payments of about 2,000 yuan.

In the era of offline-and-online sales called New Retail, Tmall has become the preferred e-marketplace for automobile industry players to set up their digital stall. Nearly 500 car dealers have already set up shops on Tmall.

The implications for the consumer are enormous.

Without middlemen, car prices are trending lower. And the online channel offers better auto financing options.

This marks significant progress for China's vehicle market, where numbers tend to be staggering.

About 29.4 million new cars are forecast to be sold in China this year, up by 5 percent year-on-year, according to the

China Association of Automobile Manufacturers.

Passenger car sales volume could increase by 5 percent to 25.7 mil-lion vehicles this year.

Contact writers through wangzhuoqiong@chinadaily.com.cn.

(China Daily European Weekly 08/18/2017 page26)