Downsizing the number of directly operated stores is becoming a new industry trend, with both Xpeng and Zeekr increasing the proportion of dealer stores, according to local media.

(Image credit: CnEVPost)

Selling cars through directly operated stores is a key feature that differentiates electric vehicle (EV) makers from traditional ones. But a new report says Xpeng (NYSE: XPEV) is shifting to a model that relies more on traditional dealerships to increase efficiency.

Xpeng is phasing out inefficient directly-managed stores and expanding the number of dealer stores, local media outlet Jiemian said in a report today, citing several people familiar with the matter.

The move is part of Xpeng's "Jupiter Plan," announced at a channel partner conference in early September and headed by new president Wang Fengying, who is in charge of sales, and centers on gradually replacing the old direct-sales model with a dealership model, according to the report.

Earlier this year, directly-managed stores accounted for 70 percent of Xpeng's store count, and the company recently reduced its 24 sales regions to 12 in order to manage external channels with fewer, more focused teams, the report said.

Xpeng's regional heads can decide on the funding of marketing and marketing activities in their regions, as well as the addition or reduction of channels, a person familiar with the matter said, adding that the regional heads have the authority to close a directly-managed store once it is not efficient and to transfer it to an interested dealer investor.

Xpeng's restructuring for the channel began in June, and it has closed a number of poorly run directly-managed stores, according to the report.

Xpeng's sales network had 411 stores as of June 30, the company said when it announced its second-quarter earnings on August 18, without disclosing a breakdown of directly operated stores and dealer stores.

He Xiaopeng, the EV maker's chairman and CEO, said in an analyst call following the second-quarter earnings report that Xpeng will bring on dealer partners at a faster pace to accelerate market share expansion in second-tier and lower-tier cities.

Xpeng requires dealers to have registered capital of no less than RMB 10 million yuan ($1.37 million) and annual operating revenues of at least RMB 100 million from its automotive business, according to its website.

The dealers' stores must be located in the mainstream automobile business districts in cities, with an actual area of no less than 1,000 square meters and a showroom area of no less than 300 square meters.

Dealers have rich channel resources and flexible store-building capital, which can help Xpeng reduce the financial and operational burden of directly building stores and quickly expand in lower-tier markets, Jiemian's report noted.

In addition, expanding the dealerships will help leverage Ms. Wang's core dealer resources accumulated during her traditional automotive days, the report said.

Wang specializes in marketing and sales services, and is able to manage the dealership channel with minimal resources and even achieve the same level of service as directly operated stores, the report said, citing unnamed industry sources.

As the penetration of EVs increases, downsizing the number of directly-managed stores and expanding the size of dealerships is becoming a new industry trend, the report said.

Geely Holding Group's premium EV subsidiary Zeekr is also making channel adjustments to increase the proportion of dealer stores, according to Jiemian.

Zeekr has launched a dealer recruitment program, which is divided into two batches, and is currently focusing on China's first- and second-tier cities, according to the report.

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