Sell your conscience, and you still won't earn more.

Text | Huashang Taolue Xiong Jianhui

March 2016, Yizhuang, Beijing.

With a furious roar, a car rammed into the auto showroom. Still unsatisfied after crashing around, the driver got out and roared incessantly: It's too insulting! It's really too insulting!

What pushed a decent Beijing car owner to this point?

[Major Industry Collapse]

In 1998, 57-year-old Koji Kadowaki was appointed as the first general manager of Guangzhou Honda in a time of crisis.

His mission was to represent Honda in acquiring the bankrupt Guangzhou Peugeot and revitalize it.

Living up to expectations, Koji Kadowaki, still sharp as a tack, successfully launched the first locally produced "Accord" at Guangzhou Honda just nine months later.

However, what Koji Kadowaki was most proud of was leading Guangzhou Honda to establish a new model that integrated sales, spare parts, after-sales service, and information feedback, known as:

The 4S store model.

Establishing 4S stores was highly aligned with Honda's advocacy of the "joy" concept, aiming to make car owners happy with their purchases and satisfied with their usage.

In sync with Guangzhou Honda, China's 4S stores quickly became a dazzling industry, giving birth to a batch of listed companies.

But after just over 20 years, it seems that everything has come to an end.

On July 18, 2024, as Guanghui Auto's share price fell below 1 yuan for 20 consecutive days, the automotive dealer, ranking first in sales and second in revenue in China, withdrew from the stock market in disgrace.

Guanghui's strength cannot be underestimated.

It boasts 695 4S stores and a "sky net" covering 28 provinces and municipalities nationwide. At its peak, it earned 170.4 billion yuan annually, making millions every day.

However, after 2020, Guanghui's performance declined, and it is now mired in a financial crisis. During its nine years as a listed company, its share price plunged by 96%, and its market value evaporated by over 100 billion yuan.

Guanghui has lasted quite a while.

In 2023, Zhejiang Zhongtong ceased operations, and the "king of 4S stores," Pangda Group, was delisted.

In 2024, Guangdong Yong'ao and Jiangsu Senfeng suffered consecutive financial blows, triggering a "domino effect."

Before that, a batch of 4S store listed companies had been delisted or relegated to penny stock status.

Moreover, none of them fell gracefully.

Take Guangdong Yong'ao as an example.

On the night of its financial collapse, banks swiftly moved in, sealed off the stores, and towed away all the vehicles in its 4S stores to preserve assets.

When the news spread through "car owner groups," car owners finally woke up to reality.

Some had just paid hundreds of thousands for their cars but ended up with neither the car nor their money; some had not received refunds for deposits or completed subsidy procedures; some had paid for maintenance but had not completed it; some had not collected gifts or vouchers...

It was like a "buying a car and encountering an unfinished project."

According to data from the China Automobile Dealers Association: Over the past four years, over 8,000 4S stores have completely disappeared; in 2023, the proportion of auto dealers incurring losses reached 43.5%.

There are currently over 30,000 4S stores nationwide, and most are barely surviving.

The industry further predicts: In the next three years, one-third of 4S stores will continue to close down. Some even believe that this prediction is too optimistic.

On one hand, China's automobile production and sales volume, as well as export volume, have reached the top globally; on the other hand, 4S stores are systematically collapsing. Why? Someone summarized three reasons:

First, the automobile "price war" is fierce, and 4S stores can only suffer losses while accompanying the competition.

Second, manufacturers pressure stores with large-scale inventory, occupying a massive amount of 4S store funds. As a result, 4S stores lose money while "rushing to increase sales" for "rebates" and frantically raise funds and leverage, making their capital chains highly susceptible to collapse.

Third, 4S stores require significant investment and high costs, coupled with rigid burdens such as rent, wages, and loans. The larger the operation, the more prone it is to collapse. Additionally, an increasing number of automakers are starting to open their own stores.

However, from the perspective of consumers, there aren't so many reasons; it's just "no zuo no die."

[Deep Tricks of 4S Stores]

October 2023, a 4S store in Nanchang, Jiangxi.

When viewing cars, Ms. Li was satisfied with the quoted price; however, after signing the contract and stating that she would not take a loan, the salesperson immediately "changed their face."

Soon, the discussion turned into an argument.

Then, the salesperson shouted, telling the customer to "get out" and asking, "What are you buying with a 100,000 yuan car?" When Ms. Li said she would call the police, the salesperson shouted, "If you don't call the police, you're a dog."

The incident was exposed and went viral on the internet.

In recent years, "4S store conflicts" have intensified.

From a female Benz owner sitting on the hood in a Xi'an 4S store to demand rights, to a salesperson at a Haikou Lexus 4S store shouting at law enforcement officers, "Then you should file a case," and then to a threat to a car owner's family at a 4S store in Yizhuang, Beijing, leading the car owner to drive and "ram the store"...

Behind these conflicts is consumers' deep-seated resentment towards the poor business practices of some 4S stores.

First, prices are not transparent.

When buying a car at a 4S store, bargaining has become an "art." Bargaining too little makes one feel like a "big fool," while bargaining too much means the salesperson "has no authority" and pretends to go upstairs to "apply."

Afterward, the salesperson will put on an expression of grievance, as if scolded severely by a leader, sincerely saying, "You won." Not only do they reluctantly accept your "bargain," but they also proactively offer a "new car gift package," hoping that when you are overjoyed, you will immediately sign the contract and pay the deposit.

But once the deposit is paid, things are different.

Storage fees, transportation fees, inspection fees, towing fees, licensing fees, service fees... Various fees that you never knew about before one by one appear. Dare you not pay? The deposit is non-refundable! Discounts and gift packages are gone!

Next, "bundled consumption" begins. From floor mats with excessive formaldehyde to counterfeit dashboard cameras, to crystal coatings claiming to protect original paint, they are all designed to rip you off.

Especially bundled car insurance, which is considered the salesperson's "inverse scales." Dare not to buy, and "tricks" will emerge one after another.

Discounts are tied to insurance; if you don't buy, there's no discount. If you don't buy in the store, accident repairs will be troublesome. If you still refuse, they will politely inform you that "there are no ready cars" and make you wait; the rude ones will simply tell you to "get lost"...

After all, for a new car's full insurance of 6,000 yuan, the 4S store earns a significant commission. This money, even if the king of heaven comes, they will still earn.

Even buying a car in full payment is not favored. Otherwise, who would they go to for low-interest traps, high-interest loans, and financial service fees? For a car costing over 100,000 yuan, generating tens of thousands of yuan in interest is precisely the service that 4S stores want to provide you with the most.

If you insist on buying a car in full payment, some 4S stores will even offer a huge discount and trick you into signing a fake car loan contract, agreeing to jointly fleece the bank, with monthly payments transferred to you.

If you don't sign, the discount is gone; if you sign and the money is transferred, you may think everyone is happy.

But as soon as you turn around, the 4S store will use the car loan contract as collateral, cash out, and run away without a trace. When the bank comes to tow the car away, you have to accept it whether you like it or not.

After finally getting the car, maintaining it is another ordeal with 81 difficulties.

From changing synthetic oil to cleaning the throttle body, from engine carbon deposits to cleaning fuel injectors... Here should be repaired, there should be maintained. Taking advantage of your ignorance, thousands of yuan can disappear in the blink of an eye.

You go to 4S stores because their personnel and parts are more formal, hoping to spend money for peace of mind, but you can't guarantee that they won't take advantage of you being a novice.

Saying they will change high-grade oil but not actually doing so; saying they will change original parts but not actually doing so; saying repairs are needed but they are not; and even replacing your good parts with bad ones...

In a word, consumers have suffered from some 4S stores for a long time. Even though most enterprises provide sincere service without deceiving anyone, and only a few act recklessly, the entire industry still has to pay the price.

[Already Dusk]

But in the past, consumers' resentment never defeated 4S stores.

The reason is simple: As long as you buy a car, you can't escape 4S stores; if not at this store, then at that one.

Even if you are dissatisfied with maintenance and repairs, comparing options may not provide too many alternatives. The saying goes, "All crows are equally black," and 4S stores may relatively be less black.

In short, even if dissatisfied, the meat is still in the mouths of 4S stores.

Even if automakers are dissatisfied with the behaviors of 4S stores, they generally turn a blind eye because they still need them to sell cars.

But now, the situation is different. This difference first comes from automakers.

In 2007, while building Tesla, Musk founded a new species called "Tesla Stores."

In his wild imagination, "Tesla Stores" will combine the highlights of Starbucks and Apple experience stores, using a cool exhibition hall to focus on car displays, consultations, and test drives; deliveries and after-sales services are handled in service centers; sales are placed on the official website, unified and transparent.

The "direct sales model" in the automotive industry thus accelerated its arrival.

In July 2013, the first Tesla experience center opened in Beijing Parkview Green, officially announcing that "the wolf is coming.""Since then, domestic new forces and even new brands of some established giants have chosen this model one after another. 4S stores quickly went from "not understanding, not respecting" to "being too late," and could only watch helplessly as the "new forces" in car manufacturing blossomed with direct sales stores everywhere.

According to the "2023-2024 China Automobile Circulation Industry Development Report" by the China Automobile Dealers Association: By the end of 2023, there were 18,877 independent channels established by new energy companies, with the proportion of direct sales increasing from 22% in 2022 to 30% in 2023.

▲Source: "2023-2024 China Automobile Circulation Industry Development Report

This means that there are nearly 6,300 direct sales stores of new energy manufacturers, and the proportion is still rising.

More importantly, consumers quickly feel the benefits of direct sales.

Direct sales stores are usually located in urban central business districts, making it convenient to view and test drive cars and communicate face-to-face with manufacturers. Due to direct sales by manufacturers, car prices, insurance, loans, accessories, and services are fully transparent, eliminating the need for scheming when buying a car.

In terms of after-sales service, the structure of new energy vehicles is simple, with maintenance costs only one-third of those of fuel vehicles, and on-site maintenance has become the new normal.

As a result, buying a new energy vehicle is like buying a mobile phone, quick and enjoyable, and the troublesome 4S store model is almost abandoned in the new energy era."New forces" manufacturers also benefit from this.

According to estimates, due to vicious competition, 20% of the sales expenses of traditional 4S stores become unnecessary losses. In direct sales stores, these 20% represent profits that can be earned."Perhaps realizing this, Li Xiang, CEO of Lixiang, strongly supports direct sales: "We will not authorize any agents or dealers and will always adhere to the direct sales model.""This has also brought huge returns to Lixiang."In 2023, Lixiang delivered over 376,000 vehicles, achieved revenue of 100 billion yuan and net profit of 10 billion yuan, becoming the first Chinese "new force" with a value of 100 billion yuan in one fell swoop.""Among them, the contributions of 467 direct sales stores located in 140 cities across the country cannot be overlooked."With the help of direct sales, NIO has simply transformed itself into a "membership enterprise.""Through user communities, NIO's executives, employees, and car owners, fans can communicate and interact directly; the membership level system built on this basis allows NIO to provide exclusive and customized services to car owners."As a result, people have to face the current fragmented reality: While 4S stores rack their brains with tricks, NIO is providing members with one-click energy replenishment, door-to-door car pick-up, maintenance on behalf of customers, and even door-to-door care for pets such as cats and dogs, among other "premium" services."Members, in turn, reciprocate: Some people actively "promote" friends to buy NIO cars, with the most extreme case being someone selling over 160 cars at once."As a result, people jokingly call NIO an "upscale social platform" in essence, and buying a car is actually paying "membership fees.""In addition to the direct sales disruption in the new energy era, the major profit source of 4S stores, maintenance and repairs, is also being continuously disrupted and shared by internet car maintenance platforms."In recent years, Tuhu, JD Auto, and Tmall Auto have begun to rapidly penetrate the market. Fuel car owners suddenly realize that besides " Pit dad " (deceitful) 4S stores, branded car maintenance and repair shops are also options."From having their gameplay disrupted to having their demand replaced, the fundamentals on which 4S stores rely for survival, as well as the growth points for seeking more profits, have been fundamentally shaken."Although there is still controversy within the industry about the ultimate fate of 4S stores."For example, one view is that although direct sales are good, manufacturers face challenges such as high capital requirements and high operating costs, and 4S stores are still indispensable. Indeed, some "new forces" are also trying "direct sales + agency," leveraging existing 4S store channels to accelerate network layout."Another view is that the number of fuel vehicles is still large enough, and the increment is also not small, so they will not be completely replaced in the foreseeable future. Therefore, 4S stores still have opportunities."In addition, some attribute the current predicament of 4S stores to the macro environment, which will eventually improve."However, these reasons are probably just superficial for specific 4S store enterprises."The real issue lies in how today's 4S stores can truly create value for consumers."If they can continue to create value efficiently and with high quality, the current danger is an opportunity for a fresh start; otherwise, elimination is inevitable, even without direct sales or internet platforms for car maintenance, etc."Because today's consumers are no longer gullible and have plenty of money."And Musk has long asserted: "Cooperating with dealers will not end well.""Just like in the past, when someone accused JD.com of "killing" computer cities, Liu Qiangdong, who originally ran a store in a computer city, firmly disagreed:"It's not JD.com that revolutionized you but yourselves! Ask yourselves, how many deceptive practices have you engaged in? How many counterfeit products have you sold? How many customers have you beaten up? This is karma!""This is also the fundamental issue facing 4S stores today."[References]

[1] "2023-2024 China Automobile Circulation Industry Development Report" by the China Automobile Dealers Association [2] "2023 National Auto Dealer Survival Condition Survey Report" by the China Automobile Dealers Association

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