Nio recruits dealers in a move to adopt an agency sales model in China

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Nio posted an advert searching for dealer partners to operate their stores in China, hinting that the company will adopt an agency model in addition to its direct sales model. EV maker announced both the Nio brand and the upcoming entry-level subbrand are open to partnerships.

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The agency model differs from the dealership model in many ways, but if we oversimplify, the main difference is who sets up the price. In the dealership model, it is the dealer, and the automaker cannot influence it. In the agency model, the automaker sets up the price, and the agent has to follow it. You can consider the agency model as the middle way between the direct sales model, where the OEM (original equipment manufacturer) automaker is in charge, and the dealership model, where a dealer is in control.

The advert on the Nio app stated various requirements for the Nio agents. Those who want to apply and operate Nio stores and sell Nio cars need to rent a 500 – 1000 square meters venue with at least 20 parking spots and 2000 square meters for maintenance and service area, with at least 30 parking spots. According to Nio, having a battery swap station on site is not a requirement and remains optional.

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If the applicant wants to opt for a battery swap station, he needs to secure an additional 600 kW power capacity for the site.

The applicants must have at least five years of experience managing luxury 4S stores. 4S stores are the most popular set up of car dealerships in China, bringing together sales, service, spare parts, and surveys at one venue.

Editor’s comment

Nio is burning money at incredible speed, and the company is looking for ways to relieve the pressure and reduce costs. Two weeks ago, the company announced it would lay 10% of employees, and the transition from the direct sales model will also help. Nio won’t need to keep all showcased cars on the balance sheet, and who knows, maybe their agents will prove themselves to be better salespeople than Nio House staff.

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Visiting a Nio agent might never be as pleasant an experience as visiting a Nio store, but those hardcore, profit-driven business people from dealerships know how to sell you a car, whether you want it or not.

In October, it was reported Nio is tapping European dealers to partner with their upcoming entry-level brand (Alps, Firefly). Nio operates a direct sale model in Europe, and their deliveries are struggling, as it proved to be challenging to convince the traditional customers of BBA (Chinese term for German premium trio Benz, BMW, Audi) to switch to the unknown Chinese brand. At that time, it’s President Qin Lihong confirmed that European sales didn’t fulfill their expectations

Nio didn’t announce any target for European sales, but they announced they plan to have 120 battery swap stations in Europe by 2023. Currently, they built about 30, hinting not everything went according to plan.

Moreover, In September, another China EV start-up, Xpeng, announced it would close some of its underperforming direct-operated stores and switch back to the dealership model to improve efficiency and reduce expenses, calling it a project Jupiter.

It is good news for dealers in China. At one point, it seemed the dealership model was outdated, boring, and destined to be extinct, and many EV makers followed Tesla and adopted direct sales operations. Now, we see dealers might be boring, but it still works.

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