Denza and Fang Cheng Bao are recruiting dealers, becoming the latest Chinese auto brands to abandon their direct-only sales model.

Denza and Fang Cheng Bao, two sub-brands of BYD (HKG: 1211, OTCMKTS: BYDDY), have begun recruiting dealers and will ditch their direct-only sales model for further expansion.

Both Denza and Fang Cheng Bao announced their plans on their respective social media channels yesterday and invited interested dealers to join.

Denza will launch more flagship products in the future, and to better serve users, it will adopt a "direct + dealer partner" channel model globally, the brand wrote in a WeChat post yesterday.

Denza will accelerate its channel layout and build a diversified channel system to cover the global market, it said.

Denza requires candidate dealership sites to be located in automotive shopping districts, and established 4S (Sales, Spare Parts, Service, Survey) stores of premium brands will be prioritized.

Fang Cheng Bao's first batch of dealer recruitment is open to China's 22 provinces, four municipalities and five autonomous regions, its published plan shows.

To date, Denza has over 400 directly-managed stores in China, covering 149 cities, and Fang Cheng Bao has over 150 stores, covering over 80 cities.

Denza was founded in February 2011 as a joint venture between BYD and Daimler, each holding a 50 percent stake at the time. In February 2022, the Daimler brand was rebranded as Mercedes-Benz.

BYD's stake in Denza increased to 90 percent in 2022, while Mercedes-Benz's stake will decreased to 10 percent.

Denza's current models on sale include the D9 MPV (multi-purpose vehicle), the N7 SUV (sport utility vehicle), and the N8 SUV, which have cumulatively sold 184,933 vehicles through the end of May, according to data compiled by CnEVPost.

BYD officially launched the Fang Cheng Bao brand on August 16, 2023, and the new brand's first model, the Bao 5 off-road SUV, was launched on November 9, 2023, with deliveries beginning at the end of the same month.

By the end of May, Fang Cheng Bao had cumulatively delivered 21,315 vehicles, according to data compiled by CnEVPost.

China's earliest major new car makers have adopted a direct sales model similar to Tesla's (NASDAQ: TSLA), hoping to help boost margins as well as build customer loyalty.

However, as the sector has grown rapidly over the past few years, more startup car companies have begun to bring in dealers in the hope that they'll help expand sales.

Xpeng (NYSE: XPEV) launched the Jupiter Project in September 2023 to expand dealer recruitment. The company was founded with a direct model and began bringing in a handful of dealers in 2019.

Xiaomi signed letters of intent with its first 14 sales and service partners at its headquarters in Beijing last December 29, the day after the official unveiling of its first model, the SU7.

Xiaomi EV's new retail is centered on direct sales and leverages high-quality external forces in pursuit of business efficiency and user experience, Xiaomi's partner and president Weibing Lu said at the time.

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