Technological Trend Reversal and more efficient Sales Structures – established OEMs must show flexibility

Since the mid-2000s, efforts have repeatedly been made by Chinese OEMs to gain a foothold in the European automotive industry. The Landwind and Brilliance brands are certainly among the best-known examples. In recent years, Chinese players have once again appeared on the scene, daring to make the leap into Europe. Well-known names today are, among many others, Aiways, Lynk&Co, or MG.

This time, however, the signs are different. Whereas in previous attempts the lead in know-how and experience of the established German automakers, based on the further development of conventionally-powered vehicles over almost 100 years, was decisive for the failure of Chinese newcomers, the current change in the automotive industry is causing this lead to diminishing. This change is being driven by the increasing focus on future trends such as electromobility, connectivity, and new mobility solutions.

The expertise required to deal with these future challenges and also the production of increasingly important new components (batteries, chips, sensors) and software solutions (infotainment, networking) is already located in the Middle Kingdom.

Apart from the technological transformations in the automotive industry, there is another important aspect that comes into play, i.e. how are Chinese OEMs positioning themselves in terms of adapting their sales structures to gain a presence in the German market?

Taking a closer look at the currently best-known Chinese manufacturers in Europe, one can identify different distribution strategies.

In addition to rather inconspicuous cooperation with local importers and joint ventures with established brands, to be able to tap into existing distribution networks, the opening of flagship stores and online direct sales are also among the strategies used by Chinese OEMs to bring their products to customers on the German and European markets. In addition, the promising Chinese manufacturer Aiways even covers areas of after-sales services through cooperation with their partner ATU to be able to offer nationwide services to their customers. All of the aforementioned strategies can make use of enormous cost-saving potentials if compared with the classic development of own sales networks. This could also be an example of which new competitors might follow in the future.

WHAT CAN OEMs THAT ALREADY EXIST ON THE MARKET LEARN FROM THIS?

On the one hand, the young Chinese brands that are now attempting to enter the European and German markets are drawing on the lessons learned from earlier attempts by other manufacturers that failed. On the other hand, however, what is likely to be much more decisive in the current starting situation are the circumstances already described above, which have changed a great deal compared with the situation 15-20 years ago, and to which the established manufacturers in Europe and Germany must also adapt.

In concrete terms, this results in the task of being able to predict future trends for the local market at an early stage and also to create the basis for being able to offer future products competitively. Important topics in this context are above all battery production and proprietary IT solutions.

By selling only online or cooperating with established OEMs, Chinese manufacturers generally avoid setting up their distribution networks in the European markets and can thus achieve considerable cost savings, while for German manufacturers distribution costs amount to up to a quarter of the purchase price. In principle, potential cost savings should always be examined in light of the company’s quality standards. Nevertheless, this should prompt the local OEMs to also fine-tune their sales strategies or to completely rethink them in order not to be overtaken by the new competition.

HOW WE CAN SUPPORT

Panoff Consulting has been studying automotive dealership processes for many years and has gained insights into how you can adapt your strategy and optimize processes so that your customers are delighted with a smooth and enjoyable car buying experience. Contact us and we will show you how we can put our methods and competencies to work for you to be prepared for the change in mobility.