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Industry Research Comments|Two Development Trends Brought by New Forces of Car Making

Alumni and External Relations Office 2021-06-08

Consistent with the theme of the 19th Shanghai International Automobile Industry Exhibition, the automobile industry needs to "embrace changes". Whole vehicle production and marketing was originally a unified path for new forces to enter the automobile industry. Huawei provided another way: parts service.This article summarizes the preliminary research results by Industry Research Team on the automobile industry in China.

The new forces of car making show two development trends: production-marketing integration and platform. Based on different perspective of the industry, the trend of platform is different.

For car makers with whole vehicle production and marketing, the trend of platform is reflected in community operation and owner service; for accessories manufacturers such as Huawei, the trend of platform is the IoT platform constructed around vehicles.

Production-marketing Integration

Tesla set off a car retail revolution in the United States, replacing 4S stores with direct sales.

There are no restrictions on the direct sales model in China. NIO, Xiaopeng and Lixiang, the three largest new car manufacturers in China, all adopt the direct sales model.

Compared with the 4S store dealership, the direct sales model takes up a lot of money and manpower to rent and build the store, and incurs staff salary cost, facing more complex management mechanism and high management cost.

The advantage is that in terms of revenue, it saves the commission and rebate of 4S stores, and further turns financial insurance, vehicle services and accessories, etc. into the income sources of manufacturers.

In terms of operation, it is conducive to the user data accumulation and brand image unity. Since 4S store dealership as middleman is cancelled, manufacturers get direct contact with information of users and potential buyers, and use differentiated advertising and marketing means. All users are managed in one platform, and a complete user ecological chain of pre-sale marketing, while-sale contact and after-sale service & maintenance is built up. Stores are managed directly, and unified brand image is built: store site selection, price, service quality and appearance image.

New forces of car making can obtain the brand endorsement and the capacity of vehicle R&D and supply chain of traditional manufacturers, and can also set up the direct sales network, with early competitive advantage.

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Platform

The community platform and IoT platform derived from users and automobiles are the most noteworthy new directions for the development of automobile industry in the future.

The direct sales model allows manufacturers to access first-hand user information for community management and marketing.

For example, car clubs used to increase the sense of group belonging of car owners, but it couldn't be transferred to the vehicle brand.

The new forces of car making opened direct sales stores at high-end shopping malls, increased the probability of direct communication services to users, and actively launched various car owner activities to enhance brand loyalty. The community operation model runs both online and offline.

The APP of NIO has become a large-scale social platform based on service and centered on the function of Moments. In 2020, there were 1.2 million registered users, and the recommended purchase rate of old users was 69%, forming a typical Internet word-of-mouth marketing.

The public communication platform became popular, and the power of the media gradually moved from the media organizations to ordinary people. The advertising mode has also changed from brainwashing communication to word-of-mouth communication.

Huawei enters the intelligent automobile industry from the upstream supply chain, saving huge time and money costs of vehicle R&D and sales, becoming a community of interests with car makers, and promoting the development of the automobile industry.

Huawei not only provides B2B supporting services, but also reaches user groups more closely than traditional car makers through the HarmonyOS carried by vehicles and the IoT ecosystem built by itself.

It is a competitive strategy frequently used by Internet enterprises with smart phones as traffic portals to get closer to users, infiltrate into daily life, build application scenarios, and compete for user traffic. The IoT platform is a new traffic pool created by Internet enterprises with the help of automobile, a new intelligent mobile terminal.

The IoT carried by vehicles can complete the remote linkage between users and external businesses, provide IoT services, and even achieve linkage between vehicles after the communication standards are unified, so as to improve the driving safety. Its huge imagination still needs a long time to cultivate before final realization.

Intelligence and Internet have brought new business and marketing models after entering the automobile industry. Huawei and NIO represent two different development models of intelligent automobile industry. The former aims at building a platform, while the latter aims at vehicle sales.

In the future, the competition in the automobile market will no longer be limited to brand power and product power, but be extended to all-round aspects such as after-sales service, community operation, and connected ecology.

Pan Yuchao, Researcher of the Industry Research Institute(IIR), Shanghai Jiao Tong University