Can JD.com "Make Cars" Become The Second Huawei?

After making a strong entry into the food delivery sector, JD.com's business landscape has expanded further.

On October 14th, at JD.com's 11.11 Surprise Opening Day, JD Auto announced a joint initiative.CATLThe subsidiaries Times Electric andGAC GroupJointly launch a "nationally popular car." Unlike Xiaomi's direct involvement, JD's participation this time is more like Huawei's approach of "helping automakers build good cars."

According to official information from JD Auto, JD's role in the creation of this "popular car" is to provide user insights and advantages in car purchasing and maintenance. In the introduction of this cooperation by GAC Group, it is mentioned that JD's resources in supply chain and digital ecosystem are integrated.

As for GAC and CATL, one is responsible for manufacturing, while the other provides battery technology and a battery-swapping ecosystem. The ultimate goal is to offer users a one-stop car buying experience that is as convenient as buying a mobile phone. It is worth mentioning that JD Auto also mentioned breaking the conventional "bare car" consumption model. In addition to the standard version, customers can flexibly choose from various packages such as "custom car wrap version," "car accessories version," and "maintenance enhancement version," ushering in a new "one-stop customization" consumer experience when buying a car.

"JD.com serves as the sales channel, GAC Aion dealers are responsible for delivery, and CATL provides battery swapping services," a relevant person from GAC Group revealed. "The three parties are working together, which can be considered a trial run."

Unlike Xiaomi's positioning as a car manufacturer, JD.com seems more like a "channel provider." So, can JD.com's model bring new changes to the automotive industry? And can it gain a share of the automotive market?

I've been interested in "automobiles" for a long time; will JD.com get burned again if it reaches out?

Despite being an e-commerce platform, JD.com is not unfamiliar with the automotive industry. In 2015, Richard Liu personally invested in it. Additionally, he and Wang Jianlin once accompanied Dong Mingzhu in investing in Yinlong New Energy. In the following years, JD.com has consistently developed its presence in the automotive industry, from launching a vehicle trading platform in 2018, to establishing the Automotive Business Unit in 2021, and then upgrading "JD Car Club" to "JD Auto Service" in 2022, covering auto parts sales and offline maintenance services.

Over the past few years of hard work, JD.com has made significant inroads in the automotive industry, especially in the aftermarket. JD Auto's tires, engine oil, and other products have been widely used by car owners for maintenance and repairs. In 2023, JD Auto Division officially became independent and proposed to create a full life-cycle service loop around car owners, including "purchase - equip - maintain - use - replace," building a complete automotive ecosystem.

The collaboration with GAC and CATL to launch the "National Good Car" may also be part of JD PLAY. Compared to previous partnerships with automakers for car sales and marketing, this "joint launch" indicates a different approach in JD's collaboration with automakers. It is notable that JD has previously extended its reach, but it got burned. In 2021, JD teamed up with Enovate Motors to launch the "JD Selected Cars" series, with the first customized model ME5 PLUS available for sale on the JD platform.

At that time, Skyworth Auto and JD.com explored the deep development and customization of intelligent mobile terminals, planning to integrate JD.com's own product development, retail, and after-sales support capabilities to jointly create a mobile travel solution that encompasses the interaction layer, scene layer, and hardware layer. However, in the end, with the downfall of Skyworth Auto, the plan fell through. Perhaps this is also an important reason why JD.com is now partnering with GAC Group and CATL, as these two are much more reliable compared to the former Skyworth Auto.

However, will JD.com get burned this time when it reaches out, and can it play the central role?

The beautiful ideal of one-stop shopping, the reality of no profit dilemma

According to JD Auto's description, this "national good car" will achieve breakthroughs in safety, battery and replenishment, vehicle support services, and price, while innovatively creating a new one-stop car consumption model. Consumers will also receive a new car equipped with the packages they need, making it as convenient as buying a mobile phone.

From the perspective of the vehicle itself, the definition of a "national good car" by the three parties is: to conduct research and design focusing on the real pain points of users, with an emphasis on four key aspects: performance safety, stylish appearance, range capability, and affordability. The aim is to achieve the optimal balance and launch a vehicle that people can afford and that meets more than 90% of their daily commuting needs.

Ultimately, JD's role in this collaboration is more about providing user insights and sales channels, positioning itself somewhat like a car dealer. It's worth mentioning that JD has abundant traffic and channels, given that its years in e-commerce and JD Auto Services have not been in vain. In terms of channels, JD owns nearly 3,000 JD Auto Service stores and over 40,000 partner stores, as well as JD Auto Modification flagship stores and self-operated film factories.

If all these channels sell cars, GAC might become the car company with the most channels in China. However, there is a very realistic problem: car sales do not necessarily make money, and a business that doesn't make money... Data shows that the net profit margin of Chinese dealers dropped from 2% in 2019 to -2%, and is expected to fall to 0% by 2024, with the net profit margin continuing to decline. Of course, JD.com still has traffic, and traffic can be converted into sales.

According to Questmobile data, in terms of traffic, in the second quarter, JD's daily active users increased by 35% year-on-year, monthly active users grew by 17% year-on-year, and the average daily usage time per user increased by 25% year-on-year. All three figures are significantly higher than those of Taobao and Pinduoduo during the same period. Additionally, through cooperation with other brands, JD's related platforms have also launched full vehicle brand stores, such as...TeslaAudi, Lynk & Co, etc.

The editors of "Financial Circle & Daoge Talks Cars" have noticed that these "online stores" mainly sell peripheral products, offer deposits, and provide free test drive services, while complete vehicle sales are relatively rare. So how will JD.com undertake the so-called "exclusive sales rights"?