New Energy Vehicle Channel Transformation: Direct Sales "Cooling Off" and Diversified Operations

Securities Times reporter Mei Shuang

From a direct-operated model once hailed as the industry’s flagship innovation benchmark dominating the market, to today’s active readjustment and a return to a diversified channel layout, the retail ecosystem of China’s new energy vehicle industry is undergoing a profound transformation.

In the past, new energy vehicle brands clustered into core urban commercial districts, and supermarket and department store exhibition halls became an industry standard and major traffic hubs. The Securities Times reporter’s recent on-the-ground visits found that some once-bustling car experience areas are now frequently “changing faces,” with brands updating at a faster pace.

Interviewees believe that as the industry shifts from incremental expansion into a game of stock, some new energy vehicle brands tend to proactively shut down low-efficiency direct-operated outlets and switch to agency, franchise, and authorized dealership models. Saying goodbye to a single, direct-operated operating model, new energy vehicle brands are moving toward an operating pattern of “direct operation in core cities + diversified dealership channels in lower-tier markets.” In addition, the convenience of buying online has also led more brands to seek change actively, with online sales channels and offline experiences gradually deepening their integration.

The direct-operated model is gradually receding

“Wherever there is a shopping mall, there is sure to be a new energy exhibition hall.” For a certain period, new energy vehicle stores almost became a standard fixture in first-tier city malls. From core business districts to community commerce, car exhibition halls sprouted everywhere. This high-density, full-coverage channel layout was a way for brands to present their image, and it also served as a vivid footnote to the industry’s rapid expansion.

“Leveraging nationwide unified pricing, unified service standards, and the advantage of communicating directly with users, the direct-operated model can quickly win over consumers’ minds and build a new brand’s awareness.” Gu Qiuming, an automotive industry analyst, told the reporter that in the early stage of new energy vehicle development, the transparency and predictability of the direct-operated model helped automakers quickly establish brand images characterized by technology, premium positioning, and youthfulness. At the same time, automakers could efficiently reach users through direct-operated stores, collect first-hand data, and achieve user lifecycle operations—highly aligned with the development direction of new energy vehicles toward connectivity and networking.

However, in a recent visit to a new energy vehicle street area in Shanghai, the reporter found that some leading brand exhibition halls that once occupied prime mall locations have quietly shrunk. “After the store lease term expires, they may not consider renewing it.” A sales consultant from a new force brand told the reporter that high operating costs are currently the biggest challenge facing stores.

Some new energy vehicle store staff have worked out the math. For example, a new energy direct-operated exhibition hall of 200 square meters located in a core business district in a first-tier city: annual rent is about 2 million yuan or more. Add the salaries of 15 to 20 employees, plus utilities, property management, and marketing expenses, and the total operating cost for the year generally reaches more than 4 million yuan.

“Compared with the past peak of customer traffic, now stores are mostly serving as a display.” He Yufeng, head of the Shanghai Pudong store for a new energy vehicle brand, told the reporter that consumers’ understanding of new energy vehicles has already become relatively mature, so they no longer need to rely on high-density mall stores to conduct market education, and automakers no longer need to use large-scale stores to prove their brand strength. In addition, in core commercial districts of first-tier cities, rent is high and store-level efficiency is declining. In the broader lower-tier markets, it is also difficult for directly operated points to achieve low cost and broad coverage, so both the brand expansion pace and profitability are clearly constrained.

“Over the past couple of years, we cut some mall stores. We also saved a lot on renovation costs for the new stores. Part of the reason is high rent, and part is reduced customer traffic, leading to lower conversion rates once people come to the store. Compared with before, the number of customers who test drive and close deals through these stores is smaller.” He Yufeng said that previously, store sales would consult customers about whether to participate in owners’ events, but now all these “flashy but not useful” items have been removed, and the viewing process has reverted to direct inquiries and discussions about configurations.

Proactively adjusting channel strategies

Moving from a single direct-operated model to a “direct operation + franchise/authorization” model also shows automakers’ active drive to seek change. The direct-operated model’s heavy-asset nature makes it hard to quickly cover lower-tier cities, while the franchise model can expand by leveraging a “light-asset” approach to quickly capture market share in lower-tier areas.

Worth noting is that some OEMs have begun to try to transform as well. For instance, XPeng Motors previously launched the “Jupiter Plan,” converting some direct-operated stores into a dealer model. Xiaomi Automobile explores a “1+N” model: the “1” refers to Xiaomi’s self-built and self-operated delivery centers, whose functions focus on delivery, covering “sales and after-sales service” businesses. The “N” refers to agent sales and user service touchpoints. There are also some new force brand offerings that have landed with direct operation + dealership/city partner models.

Tesla, the pioneer of the direct-operated model, is also continuously optimizing its channel structure. According to information available, in first- and second-tier cities, Tesla still mainly uses direct-operated experience stores and Tesla centers. In more lower-tier markets, the company recruits authorized body shops and paint-and-body (panel and spray) centers. In recent years, Tesla has further lowered the authorization threshold, using a “light-asset” approach to fill out its after-sales service network.

Using a hybrid channel model of “direct operation + franchise/authorization” has become the current pragmatic, balanced choice for new energy vehicle automakers. Gu Qiuming believes that the direct-operated model can maintain brand image, ensure unified service standards, and control user experience in core commercial districts of first-tier cities, thereby holding the line on brand tone. Meanwhile, franchise and authorization channels can rely on local resources, financial strength, and mature networks of dealers to quickly move down into third- and fourth-tier cities and county-level markets, significantly reducing the cost of opening stores and the operational pressure on automakers, while improving channel coverage efficiency.

“Such a dual-track model preserves the strengths of direct operation in terms of transparent pricing, direct data connection, and standardized services, while also leveraging the strengths of traditional dealerships in terms of faster expansion speed, cost control, and deep regional development.” However, some industry insiders point out that agent and authorization models are also not a once-and-for-all solution. For example, after opening up franchise and authorization, dealers’ service quality and personnel caliber vary widely, which can easily lead to problems such as inconsistent service standards and a decline in user experience, and even issues like private commitments, noncompliant deliveries, and slow after-sales responses—directly impacting brand reputation.

“A pure direct-operation model may not last forever, and a ‘direct + agency’ model also cannot guarantee that the two channel types won’t conflict. Which approach is better may still require more trials and exploration.” An insider at a new force brand said.

Deep online-offline integration

Against the backdrop of continuous deepening channel change, deep online and offline integration has become a trend in new energy vehicle sales.

Today, more and more automakers realize end-to-end online processes for viewing vehicles, consultations, deposits, payments, and production scheduling through digital tools such as official apps, mini programs, and livestreams, greatly improving purchase efficiency and price transparency. Offline stores, meanwhile, have shifted from traditional sales venues to physical touchpoints for experiences, test drives, delivery, and service, carrying the core functions of brand presentation, user interaction, and localized service.

During the reporter’s visits, it was noted that besides offline foot traffic at new energy vehicle stores, “selling cars via livestream” has also become increasingly popular. Store sales personnel face the phone camera, explain vehicle models, demonstrate features, and answer online user inquiries. Stores have transformed from being purely offline experience spaces into real-time sales positions of “offline presentation + online traffic generation.”

“Shopping malls and stores that originally focused on experiences and test drives have begun to proactively use livestreams to broaden how they reach users, acquiring leads at lower cost and improving efficiency. This shift reflects not only automakers’ higher requirements for store floor productivity, but also shows that amid channel contraction and cost pressure, brands are revitalizing offline channel value using lighter-weight and more digital methods.” Gu Qiuming believes that deep online-offline integration is the necessary path for new energy vehicle sales.

In response, industry participants suggest that, facing the trend of deep online-offline integration, automakers should accelerate building an integrated channel system with a unified online hub and diverse offline touchpoints. On the one hand, continuously strengthen online platforms such as official apps, mini programs, and livestreams to unify orders, pricing, financial and after-sales policies, connect user data across the entire journey, and make online the core entry point for transactions, services, and user operations. On the other hand, make offline store functions lighter, more scenario-based, and more localized—focusing on experiences, test drives, delivery, and service—reduce low-efficiency mall stores, and optimize channel structure.

“Automakers should also strengthen their capabilities in digital management—remove data barriers between online and offline, unify service standards and evaluation systems, and prevent conflicts between channels. By improving efficiency online and strengthening experiences offline, you can truly achieve diversified channels, unified management, consistent services, and users connected directly—only then can you maintain competitiveness and sustainable development amid channel transformation,” Gu Qiuming said.