Automakers Shift Strategies Amid Changing Market Dynamics

Amid ongoing heavy rain, 4S dealerships have finally received an umbrella from automakers. Traditional fuel vehicle brands like Mercedes-Benz, BMW, and Audi are optimizing their channel networks by closing less efficient 4S stores, creating a stir in the auto market. They are also actively adjusting strategies through lightweight models and exploring new growth paths in lower-tier markets. The competition landscape in the auto market is fundamentally changing, with first- and second-tier cities nearing saturation while the consumption potential in third- and fourth-tier cities is accelerating. The traditional 4S model's high investment and long cycle are increasingly unsuitable for these markets, prompting automakers to shift towards more flexible and cost-effective channel forms such as small showrooms and satellite stores to reach car owners more efficiently. From FAW-Volkswagen's 'concentration authorization of hundreds of stores' to Lincoln's 'spark plan', automakers are pushing for channel transformation in various ways. This transformation is not just an adjustment of sales networks but a strategic choice for automakers to find growth amidst fierce market changes. They need to seek incremental growth in a saturated market while balancing costs and increases, which may become a key weapon for survival in the coming competitive battles. 01. From Shutdowns to Lightweight Expansion: A Major Restructuring of Automaker Channels Under the pressure of declining sales and losses, traditional fuel vehicle brands have collectively entered a cold winter, leading to a structural adjustment of dealership networks. According to industry data, 24 dealerships were authorized by Mercedes-Benz this year, with at least nine closing in just one week in June. To meet its goal of optimizing 100 stores, Mercedes-Benz will need to close about 10 stores per month in the second half of the year. Other automakers are also showing determination to cut down on dealerships: Porsche expects to reduce its 150 dealerships to about 100 by the end of 2026; BMW plans to cut its number of dealerships in China from 650 to 550; Lincoln aims to reduce its network from 150 to 115 stores. Notably, the number of dealerships canceled by automakers includes groups like Beijing Penglong Ruixing and Zhejiang Baolide, with Guanghui Group losing 230 stores since its delisting, accounting for 31.29% of its total network. Meanwhile, automakers are exploring more flexible channel models to reduce operational costs and improve market response. FAW-Volkswagen held a signing ceremony in late June for the 'concentration authorization of hundreds of stores', covering 75 new dealerships in 68 cities and counties nationwide, planning to cooperate with nine major dealer groups to open 100 new stores, potentially surpassing 1,000 by the end of the year. While the number of stores is increasing significantly, FAW-Volkswagen emphasizes a strategy of 'quality enhancement rather than just incremental growth' to ensure effective penetration into lower-tier markets. Through lightweight building modes like 'factory-store separation', they can shorten construction time significantly, allowing for rapid openings. Lincoln, having previously adopted lightweight models in lower-tier markets, reports satisfactory results, with its dealership count decreasing to 98 but rebounding to 105 due to its 'spark plan', achieving 80% profitability. Lincoln has reduced store size by 80% to 800 square meters, lowered investment thresholds to 1.5 million yuan, and streamlined teams to 10 members, cutting single-store investments to 1-2 million yuan, far below traditional 4S store investments. This lightweight model has proven effective, redefining channel efficiency, as future channel competition will focus on 'small and precise' rather than 'large and comprehensive', achieving higher terminal coverage through flexible positioning and digital tools. 02. Automakers' Lightweight Strategy for Downstream Markets: Cost Reduction, Efficiency Increase, and Scale Expansion The channel strategy for downstream markets is not simple. FAW-Volkswagen and Lincoln's layout logic shows that automakers are not just filling in gaps on the map but penetrating lower-tier markets rapidly with refined small store models, building localized channel networks. FAW-Volkswagen encourages dealerships to scale up, forming structures where district 4S stores serve as centers extending to satellite stores and other channel forms in lower markets, while collaborating with leading regional dealer groups to leverage local resources for quicker penetration. The automakers' demands are clear: they aim to expand in lower-tier markets through multiple sales channels while reassuring dealerships about their commitment to these markets. For dealerships, the heavy asset 4S model is no longer sustainable in a shrinking sales environment, making the transition to a lightweight model appealing, especially when the investment threshold is significantly lower than traditional 4S stores. Lincoln's 'spark plan' also reduces fixed costs directly, maintaining after-sales profitability and improving store operation efficiency. Additionally, Lincoln's policies to reduce inventory and shorten rebate cycles are designed to alleviate dealerships' financial pressures. The competition in the downstream market is extending from fuel vehicles to new energy vehicles, with brands like NIO, Li Auto, BYD, Xpeng, and Zeekr also entering the fray. 03. Will the 500 Billion Scale Downstream Market Be the Best Solution for Automakers? After intense price wars, both automakers and dealerships are severely injured and must find new incremental recovery avenues. With the 'low-hanging fruit' in first-tier cities exhausted, downstream markets have become a key battleground. By 2030, the vehicle ownership in rural areas in China is expected to reach nearly 160 per 1,000 people, totaling over 70 million vehicles. Meeting rural residents' mobility needs could unlock a 500 billion yuan automotive market. Policies promoting automotive consumption and subsidies for rural markets are also driving this potential. Despite the prominence of new energy vehicle companies, survival still hinges on sales performance, with a monthly sales target of 30,000 units seen as a threshold. Automakers must overcome the scale gap to secure greater profit margins. However, they also need to consider the consumption characteristics of the downstream market, where practicality, convenience, and cost are prioritized. This means providing more cost-effective vehicle models to seize this incremental market. Research indicates that automakers need over 300 sales outlets in the downstream market, each capable of supporting ten nearby stores to achieve effective penetration, necessitating substantial resources and investments. As automotive industry profit margins fall below 4%, while the downstream market is viewed as a last frontier for growth, automakers must resolve the dual challenge of 'scale expansion versus cost control', which may ultimately determine their success or failure in these markets.