Xpeng Motors Reduces Sales Area by Half to 12 Regions, Transitioning from Direct Sales to Dealership Model

XPeng Motors recently reduced the number of nationwide sales regions from 24, as determined in March, to 12. They are also gradually phasing out underperforming directly operated stores and expanding the scale of dealership stores.

At the distributor conference held in early September, XPeng Motors announced the “Jupiter Plan”. A source close to XPeng Motors revealed that this plan is led by Wang Fengying, President of XPeng Motors in charge of sales. The core initiative is to gradually replace the previous direct sales model with a dealership model.

This time, the national sales regions will be reduced to 12. This adjustment is made after the proportion of direct operation and authorized franchise channels has been modified, in order to have fewer and more focused teams responsible for external management. At the beginning of this year, XPeng Motors’ direct operation model accounted for 70%.

In March of this year, XPeng Motors internally merged the direct sales team of its automotive trading system and the user development center team of its dealer system, implementing unified management. At the same time, it adjusted the original four major regions (North, East, Central, and South) to 24 more segmented battle zones.

Adjusting the “Regional System” to the “District System” is beneficial for the company to promptly grasp frontline dynamics, enhance overall internal synergy, and respond more agilely to intense market competition. Li Auto operates on a provincial basis, with provincial-level leaders managing store managers across the province. The goal is to conduct business planning based on the market share of each province.

XPeng Motors regional managers are responsible for the sales and profitability figures of the stores within their management scope. Store managers of directly operated stores in the region report to the regional manager. Expanding from four major regions to 24 segmented battle zones can accelerate the selection process of sales networks.

The regional manager has the authority to decide on the budget for marketing activities and channels within the region, as well as the addition or reduction of channels. If a directly operated store has low return on investment, the regional manager has the right to close it and transfer it to other interested distributors or investors.

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Recently, XPeng Motors has been screening and eliminating low-efficiency stores in its distribution channels, adjusting its network layout. Sun Shaojun, the founder of CheFans who has been paying attention to the terminal market for years, revealed in his live broadcast in August that XPeng Motors has started a new channel reform since June and has gradually closed down several poorly performing directly operated stores.

Correspondingly, XPeng Motors is gradually increasing its authorization ratio and introducing more dealerships to third- and fourth-tier cities. During the Q2 financial report conference call this year, He Xiaopeng, Chairman of XPeng Motors, stated that “we need to vigorously eliminate weak links in our sales network and introduce excellent dealership partners at a faster pace to accelerate market share expansion in second- and lower-tier cities.”

According to the recruitment criteria published on XPeng Motors’ official website, authorized dealership operating companies must have a registered capital of no less than 10 million yuan (＄1.37 million) and annual revenue from automotive business sectors exceeding 100 million yuan (＄13.7 million). Investment stores should be located in mainstream automobile commercial areas in cities, with an actual usable area of no less than 1,000 square meters and a sales showroom area of no less than 300 square meters.

In terms of the newly announced recruitment cities, XPeng Motors is striving to expand its network coverage to prefecture-level cities in each province. According to data from Jelanlu, as of the first half of this year, XPeng Motors has reached a total of 530 stores, covering 158 cities nationwide.

For XPeng Motors, dealerships possess abundant channel resources and flexible funding for store establishment. They can assist XPeng Motors in reducing the financial and operational burden of direct store establishment and facilitate rapid expansion into lower-tier markets.

In addition, expanding the scale of distributors is beneficial for leveraging Wang Fengying’s core dealer resources accumulated during the traditional automotive era. Industry insiders have praised Wang Fengying for her expertise in marketing and sales services, as she is able to effectively manage distributor channels with minimal resources, even achieving the same level of service as company-owned stores.

In fact, as the penetration rate of new energy vehicles increases, reducing the number of direct-operated stores and expanding the scale of agent dealerships is becoming a new trend in the industry.

In the early stages, one of the most direct advantages of the direct sales model for new energy vehicles is to address users’ concerns about purchasing such vehicles and provide them with a consistent standard service experience. The feedback from consumers is more direct. Automotive companies can also achieve unified price control and have stronger control over offline channels, avoiding disputes of interest with dealers.

However, as new energy vehicles gradually capture the minds of users, the market competition becomes more intense, and the drawbacks of asset-heavy direct sales models are gradually highlighted. Considering the market competition pressure and the demand for cost reduction, the agency model has become a more feasible choice. On one hand, agent dealerships can reduce the high costs of building stores under direct sales models while also having practical experience with local business environments and competitive landscapes. At the same time, with increasing sales of new energy vehicles and channel expansion, dealers can help car manufacturers save resources and quickly broaden their markets.