Ever since the late 90s, car manufacturers and especially car dealers were scared of the Internet. By the end of the 90s, it was agreed that the likes of Carpoint or Autobytel would turn into huge virtual showrooms and would put dealers out of business. It didn’t happen. The opposite happened. The many car shopping sites drove business to dealers. Ten years later, there it is again: The specter of the wicked disintermediation has returned. Direct sales to customers via electronic media are popping up in the world’s largest auto market.
Unencumbered by harsh franchise laws, and faced with stiff competition amongst more than 100 car manufacturers, Chinese automakers are starting to sell vehicles online, even via TV.
Last year, China’s SAIC set up a sales website for their Rover Roewe 550, which gets “more than 20,000 hits per day,” reports an aghast The Nikkei [sub], which says that such an approach would be “largely taboo in Japan.”
The site isn’t quite disintermediating yet. It has the usual 3-D images, car data etc. to drive buyers to dealers. However, it shows which dealers give the highest discounts, something very taboo amongst manufacturer-sponsored sites.
Geely is going one further. Customers who order a car on-line can receive a 30 percent discount if they are the lucky winner. Such a practice would cause howling protests and lawsuits elsewhere.
Worried about being disintermediated, dealers go on the counter-attack. Chinese BMW dealers have partnered with a Shanghai-based TV shopping firm. TV shoppers bought 19 cars in the first hour.
Dealers of Daimler, known as “Benz” in China, are hawking Mercedeses on TV at up to 22 percent off. The mere idea would make Dr. Z’s lose hair, and turn his moustache bright grey, if it wouldn’t already be that way.
First of all, it’s time to stop with this China as the world’s largest auto market nonsense. China may have the edge in pure number of units at the moment, but that is due to China having record high sales while the west is climbing slowly back from record low. Things will right themselves soon enough.
It is also important to not look just at volume but at average transaction price and manufacturer profits. Do you have any figures showing total volume of sales for the US vs China in dollars instead of units?
That some Chinese are buying cars via the web or off of the Chinese HSN isn’t entirely surprising, after all, many of these people are first time buyers, they don’t know how the process normally works, and given that they are upgrading from a scooters for the most part, any car will be better than what they have. The Chinese seem to like BMWs and Mercs because of the image, but overall they don strike me as a particularly saavy or choosy market given some of what gets sold over there.
Standard answer to your standard complaint: Sorry, by industry convention, the size of a market is measured by the number of sold cars, therefore also referred to as “units.” If you want to change that and measure in transaction prices, then you must convince the people who do the counting, from Edmunds to OICA. We wish you good luck in your endeavor.
I know it hurts, and when the U.S.A, will be #1, I’ll be #1 to report it, promise. (If I live that long.)
PS: GM hates your transaction price idea. With over a million el-cheapo Wulings inflating their Chinese numbers, they would be nobody in a market according to NulloModo.
PPS: How about transaction price per person to get rid of that pesky population? Would be a tight race between Qatar and Moncao ….
I don’t feel myself qualified to use such cool multi-syllabic words like “disintermediation”, but I do have to ask, did you mean “sceptre” or “spectre”?
For years, I think the metrics should have been upgraded. If we can measure GDP (BIP) by aggregating the data on products so diverse as electroporating cloning guns and chewing gum production, the auto industry could report transaction prices.
And shame on AutoNews, Global Insight, JDP and the rest for not weighting the OEM’s share of sales based not on its participation (as in the Wuling case something like 51% equity brought 100% sales to the statistical tally) but in proportion to its equity participation.
This whole thing just reminds me of how jobs are reported … “… economists say that for the economy to be healthy, 100k new jobs must be created each month…” and so, this is how it is reported in the US, “jobs created”, “jobs lost”, with no apparent regard given to (or at least openly reported) the quality of the job, or if it is one that is expected to last … if an engineer loses his job but finds employment flippin’ burgers, is it really apppropriate to say this is a zero-sum?
if an engineer loses his job but finds employment flippin’ burgers, is it really apppropriate to say this is a zero-sum?
Oh, I’ve been itching to say this.
If that engineer isn’t willing to work for what the market demands, then yes, it’s appropriate. Since he/she wouldn’t work for 60% less money, he/she has been “right-sized”.
All Hail The Invisible Hand!
Specter, actually. Damn auto-correct.
And in Wuling’s case, 37% GM
Zou muss be ZIS TALL zu ride!
It’s a pity there isn’t more info. China could be a harbinger of future auto retailing.
What they need to establish is:
Are online sales in areas already *well* served by dealerships? Underserved? Nonexistant? What are the buyers looking for? What are they avoiding? Is it a time issue? An information issue? Pricing issue?
It certainly is something to watch.
Getting back to buying on the net – it will be interesting to see how it works out in China.
If it were possible elsewhere, I wonder how many people would buy via the web? I imagine quite a few people might not care about test driving their prospective purchase – as strange as that sounds. After all, for most people are car is a refrigerator, and even if you look at the fridge before you buy it, you don’t really test it out until you take it home a plug it in.