Article | Zhou Mianwu
Editor | Cold Zelin
On May 31, NIO officially announced the trial operation of the “owner direct sales” service.
The biggest innovation points are in two areas:
- Used car buyers and sellers communicate and negotiate prices by themselves.
- The official provides detection services based on used car trading, which is not mandatory and can be exchanged for points for only 500 yuan.
This move directly benefits multiple parties: Used car sellers can sell for more money, used car buyers can spend less money, NIO’s used car residual value rate is improved, and new car transactions are promoted. Leading the way in this point, it is in line with NIO’s consistent user-centric experience, and enhances user stickiness.
How is the money saved in this process?
Originally there were two types of used car transaction model, one was to collect the full payment first, then earn the difference. The other was the so-called commission-based sale, but in actual operation, it is essentially buying low and selling high for profit.
Due to factors such as capital costs, site costs, employement costs, and inspection costs, used car dealers must have around 10% gross profit to survive. That is, a used car dealer must have about RMB 30,000 gross profit for a RMB 300,000 car in order to make a profit after taking into account the operating costs and profit space borne by the buyer and seller.
However, through the owner direct sales model, various costs can be greatly reduced, there is no need to advance payment, no need to rent venues, and no need to hire people to inspect and sell.
How much can the costs be reduced?
Bilibili UP Master Li Andi andylee also planned to do the same thing on May 29, before NIO officially launched. In his plan, he linked buyers and sellers as intermediaries, and the inspection cost was borne by the seller, while releasing a report. Regardless of the final transaction price, he only charged the buyer RMB 1,500 and the seller RMB 1,500, making a gross profit of only RMB 3,000 per car.
Therefore, the business that originally needed RMB 30,000 gross profit, only needs RMB 3,000 gross profit now, and the majority of the money saved is actually passed on to the buyer and seller.
At present, NIO has not announced whether buyers and sellers will need to pay extra money. If they do not need to pay extra money, it will mean that NIO relies on improving the residual value of used cars to promote new car transactions in order to obtain profits. This will directly kill all businesses that want to do NIO’s used car business, but the possibility is not very large.If the fee is high, it would be easier for third-party businesses interested in NIO’s used car business. Since the critical issue of inspection is handled by the authorities, only RMB 500 is required, and there is no need for an official endorsement. Whoever has the lower price will be chosen.
The price of the inspection depends on how NIO sees these business partners. If they consider them as their own channels, allowing more people to connect to NIO, then NIO will set the official price higher, around RMB 5,000.
Providing third-party businesses space for profit will establish a better ecological environment.
Although NIO has a huge advantage in acquiring potential buyers and sellers of used cars, in terms of operating costs, there is no advantage.
Because the total profit space of direct sales from second-hand car owners is not large and there is no technical content, after solving the inspection problem, it is just a simple flow realization problem.
One person collecting RMB 3,000 from two parties, and 1,000 people is RMB 3 million. For a small boss, it is a considerable income, but for NIO, the revenue is insignificant, equivalent to less than 10 car sales.
At this time, small bosses have great motivation to optimize operation details and bring better user experience, but NIO does not.
Guangqi Xingchen believes that NIO’s move is a revolutionary used car model. Although there are no technological innovations, it fundamentally optimizes business operations’ efficiency. The official charges more, and given the small bosses some profit space is also beneficial to NIO.
Other manufacturers are expected to gradually follow the official platform’s direct sales model and inspection. As long as the official provides inspection services for the second-hand car buying and selling side, it is enough to lead the trend towards the direct sales model.
In the future, the problem of the low value retention of new energy vehicles will also be improved from the aspect of the model.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.