Audi, nio, tesla, and tuhu compete to enter the market: Is It Ultimately a Game for the Giants?

Recently, the previously overlooked "little transparent" lower-tier markets have suddenly become highly coveted by various automotive experts, and their status has been elevated to an unprecedented level of importance.

FAW-Volkswagen, through a "factory-store separation and workshop sharing" model, has signed with 75 new dealers covering 68 cities and counties, reducing the store construction period to 36 days.

Toyota has partnered with the "====GO" platform, granting the platform the annual exclusive sales rights for the Corolla 1.2T model to develop the potential of the county-level market.

As representatives of luxury brands, Mercedes-Benz, BMW, and Audi are optimizing their channel networks and adopting lightweight models to focus on expanding into third- and fourth-tier cities and county-level markets.

The new energy brand NIO has launched a sub-brand called "Firefly," targeting the price range of 100,000 to 200,000 RMB, focusing on lower-tier markets. The starting price of the first model is 119,800 RMB. Through the "Hundred Cities Starlight Plan," it aims to cover all fourth-tier cities.

Tesla has been included in the catalog of new energy vehicles for rural promotion for the first time, aiming to accelerate its expansion in the county and rural markets through policy responses. Additionally, Tesla plans to launch a new model, code-named E80, in the second half of 2025. The biggest highlight of this car is its expected starting price as low as 140,000 RMB, which is only half the price of the Model 3, targeting the lower-tier market and young people's first Tesla model.

Although Zeekr and Xiaomi have not specifically launched new models targeting the lower-tier markets, they have formulated specialized business partner programs in the sales service sector, giving full attention to the lower-tier markets.

Tuhu, Tmall, and JD have recently increased their subsidy support for lower-tier markets, coincidentally expanding their reach into this previously marginal market.

Why was this huge market not discovered before, and why is everyone now flocking to it?

The time has come to develop the lower-tier market.

The concept of the "lower-tier market" mainly originates from recent economic analyses and academic discussions. When planning and summarizing the market, second-tier and above cities always appear at the forefront of various target plans or at the top of analytical charts, while the remaining areas are correspondingly referred to as lower-tier markets or markets positioned at the lower levels of the charts.

The lower-tier market refers to the consumer market in third-tier and smaller cities, counties, and rural areas, covering a population of approximately 890 million, accounting for over 63% of the total population in the country. By 2024, the consumption scale is expected to exceed 17 trillion yuan, accounting for nearly 60% of the total national consumption.

The lower-tier market had actually been developed before, mainly as secondary outlets for 4S dealerships. Additionally, when domestic cars were still in a non-mainstream status, more effort was focused on third-tier and smaller cities.

For example, in March 2009, Changan Automobile launched the "Thousand Stores and Ten Thousand Points" initiative, extending its sales network to cover 30% of the township markets. At the same time, Chery Automobile also established a comprehensive sales and service network in the second, third, and fourth-tier cities of the central economic zone.

The lower-tier markets have a large scale but cover an even larger geographical area. This accounts for over 60% of the population and consumption, coming from over 90% of the national territory. Compared to first- and second-tier cities, the per capita disposable income, average car ownership per household, and population can be described as "sparse."

In a sense, the market is a collection of people with both the willingness and the ability to consume. Applying this concept to the automotive sector, data shows that when per capita disposable income reaches 40,000 yuan, automobile consumption significantly increases, representing the capacity for car consumption. Moreover, the lower the number of cars owned per household, the greater the willingness to purchase cars. The size of the population represents the scale of this "collection of people."

In 2024, the national per capita disposable income exceeded 40,000 yuan for the first time, reaching 41,314 yuan. From the table above, it can be seen that the household car ownership in higher-tier cities is very close to the threshold of one car per household (once this state is reached, car sales will primarily focus on replacements, and growth will slow down). Of course, if Beijing and Shanghai did not have license plate restrictions, they would have long surpassed one car per household.

Haikou, as a top-tier third-tier city, still has significant room for growth in these three indicators compared to other cities in the table. As for other third-tier cities or even lower-tier cities, due to limited publicly available information, the author's own statistical data is not complete. However, it is reasonable to speculate that their growth potential is likely to be greater, indicating that the timing for developing the automotive market in lower-tier cities is already ripe.

Why is the layout still stuck at the "checkpoint" phase?

First, the deteriorating economic environment makes it challenging to develop lower-tier automotive markets. The main difficulty lies in their vast geographical scope and scattered population distribution, where residents' disposable income is hard to increase. As a result, actual operations often fail to yield satisfactory investment returns.

The vast area leads to a lower "capital density" in the market, making it difficult to form agglomeration effects and challenging to meet the operational requirements of the existing authorization and franchise systems.

For vehicle sales, the authorized system requires exclusive operations, so it is unimaginable to see a few BMWs displayed in a Mercedes 4S dealership showroom.

Fifteen years ago or earlier, when the car trading market was booming, it was common to see showrooms displaying multiple brands of cars. This was not only the case in lower-tier cities but also in first-tier cities. This phenomenon is detailed in the article "Nearly 2,000 4S Stores Close Every Year, Is This Market Becoming Desolate and Hard to Find a Home?"

In both the car trading market and the lower-tier markets, it was the individual 4S dealerships that were setting up and collaborating on "secondary outlets." Although these secondary outlets later received some policy support from the main manufacturers, they were generally managed by the 4S dealerships, and the main manufacturers' authorized lists did not include these secondary outlets.

The reason OEMs do not recognize secondary networks as authorized dealerships is because these networks do not meet the OEMs' requirements in terms of hardware construction within the CI identification system. On the other hand, these secondary networks do not apply for dealership qualifications not because they are unwilling, but because the monthly sales of less than 30 units cannot support the high initial investment and daily operational costs of a 4S store.

For car maintenance chains, there are not many franchise stores in lower-tier markets because the serviceable targets within the service radius are relatively sparse, leading to lower transaction values per customer. This results in overall lower revenue, and consequently, the profits cannot support the daily operational costs.

Moreover, the infrastructure such as transportation, electricity, and internet in lower-tier cities is far less developed than in higher-tier cities, resulting in higher costs for obtaining these public services. This leads investors to expend more effort and financial resources on "communication" regarding electricity, fire safety, environmental protection, water usage, and other aspects when investing in building stores compared to higher-tier cities.

Faced with the reality that there is still consumer willingness in the sinking market but insufficient purchasing power, as mentioned at the beginning of this article, various automakers are launching low-cost models. In terms of services, manufacturers are actively promoting a "lightweight" network, reducing hardware standards while also lowering the initial investment threshold for building stores. Car maintenance chains are even resorting to direct subsidies, striving to break through the development bottleneck of the sinking market.

Whether it's OEMs or car maintenance chains, their network expansion model is still at the "checkpoint" stage.

In high-tier cities, locations like shopping malls and automobile cities, where people tend to gather, are relatively easy to find, making it easier to form a clustering effect. However, in lower-tier cities, such spots are scarce, and even if they exist, their clustering effect is quite limited. Combined with the overall weaker consumption capacity, even if the initial investment threshold for opening a store is lowered, the subsequent operating expenses still require sustained profitability to manage.

In the face of such a market environment, besides striving to increase sales, making efforts to reduce fixed costs is also crucial for survival. In fact, the secondary network model from decades ago was a product well-suited to the market environment. Of course, the secondary network model has almost no promotional effect on the brand and remains at the "checkpoint" stage.

If the mountain won't come to me, I can go to the mountain!

03. How can one sink?

For vehicle sales, active online promotion combined with regular roadshows, whether fixed costs or variable costs, is much lower than building a standalone store.

Based on past experience, those secondary dealerships located in cities and counties, unless they offer lower prices than the primary dealerships (which are the officially authorized 4S stores) or are directly operated secondary dealerships, most consumers would rather travel tens or even hundreds of kilometers to buy or pick up their car from a primary dealership. After all, purchasing a car is ultimately a significant financial expenditure.

A stingy, "lightweight" dealership that is far from the high-end image people usually associate with a 4S store will at least significantly undermine its brand promotion effect.

For car maintenance chains, the market in lower-tier cities requires business restructuring, adopting a model of city center stores combined with on-site services.

Business restructuring refers to redefining the maintenance attributes of tasks not by categories such as maintenance, major repairs, and accidents, but by the controllability of the maintenance results, categorized as fully controllable, partially controllable, and uncontrollable.

Routine maintenance, beauty treatments, and boutique installations all share the common traits of having refined processes, clear pricing, specified consumables, portable tools and equipment, and low urgency requirements. These can be categorized as fully controllable services.

A fully controllable business is one where all factors affecting the repair outcome can be fully confirmed before the repair process begins, making it suitable for online booking and door-to-door service. Calculations show that with proper planning, it can generate economies of scale, and the overall cost is significantly lower than establishing physical locations.

Even when setting up stores, it can be a maintenance system similar to the hierarchical medical system, with regional comprehensive stores, specialized stores, and community convenience stores. There's no need to make every location a comprehensive store. Even if comprehensive stores are rolled out in lower-tier cities taking advantage of the current favorable subsidy policies, how will the subsequent survival issues be resolved? Wouldn't it just return to the dilemma of "low market capital density, insufficient to support daily operations"?

Different market environments require different operational strategies. Strategies that were successful in higher-tier cities may no longer be suitable for lower-tier cities over time.