Nio has started recruiting dealership partners for the Nio brand and a sub-brand, in what appears to be a move aimed at reducing expenses while expanding sales network.
(A screenshot from the Nio App)
Nio (NYSE: NIO) has begun recruiting dealership partners, following moves by its local peers including Xpeng (NYSE: XPEV) that appear aimed at reducing expenses as it expands its sales network.
A poster today showed it's recruiting sites for experience centers for both the main Nio brand and "Nio's strategic new brand."
The company doesn't mention "dealers" directly and the wording in Chinese is about recruiting sites for experience centers. But it looks like the company is essentially recruiting sales and after-sales service partners, and the requirements are stricter than those for traditional dealers.
It is unclear whether the wording "Nio's strategic new brand" includes only the sub-brand codenamed Alps or also the third brand codenamed Firefly, as there is no way to differentiate between the singular and the plural if the Chinese expression does not provide a specific number.
Nio requires partners joining the network to set up a sales showroom as well as offer repair services, with the construction of the company's signature battery swap stations as an option.
The company's recommended size for such sales showrooms is 500 to 1,000 square meters, repair sites are more than 2,000 square meters, and battery swap station areas are 120 square meters.
These facilities need to have sufficient parking spaces, of which not less than 20 need to be provided for the sales showroom, not less than 30 for the maintenance service area and not less than 10 in the battery swap stations area.
Nio requires applicants to have at least 5 years of experience in the operation and management of a luxury brand 4S dealership store or high-end repair center.
These facilities need to be located in the city's mainstream automotive business districts, with convenient transportation and close to the city's main roads.
Nio also requires applicants to have a solid financial position with sufficient liquidity reserves to be able to purchase specialized equipment and accessories that meet Nio's maintenance standards.
Applicants also need to have a strong staffing position and the ability to have a qualified operational management team in accordance with Nio's requirements.
They will need to be staffed in accordance with Nio's requirements, receive training from Nio and meet qualification requirements.
These service centers need to be renovated and retrofitted to Nio's standards.
Notably, on October 18, Reuters cited three sources as saying Nio was considering a network of dealers in Europe to accelerate sales growth.
After Nio president Qin Lihong said in September that European sales had fallen short of expectations, the Chinese EV maker had begun evaluating dealerships in key European markets, two of the people said, according to the Reuters report.
Another reason for utilizing dealers is to ease cash pressure on Nio, which is prioritizing spending on research and battery swap stations in China, said a third person familiar with the matter cited in the report.
However, Nio later responded that its main brand in Europe remains committed to a direct sales model, while the sub-brand codenamed Firefly will have more flexibility.
"There are no changes to the way the Nio brand is marketed and vehicles are sold in Europe," the EV company said at the time in a response shared with CnEVPost.
Nio has always been a strong supporter of the direct sales model and maintained it even as it entered the European market, hoping to bring the entire service system overseas.
However, the company approached a leading local dealer group in the first half of this year to do some experimentation in introducing a dealer model for Alps, local media outlet LatePost said in a September 14 report.
The Nio main brand briefly experimented with a model in which owners acted as franchisees, launching a partner program to save costs when it faced financial pressures in late 2019, the report noted.
At that point, owners could fund the construction of Nio Spaces, while Nio sent staff to run them on their behalf. In one year, owners helped Nio build more than 100 Nio Spaces, according to the LatePost.
This hybrid sales model allowed Nio to quickly ramp up the number of stores, but it also posed some management challenges. At the end of 2020, Nio re-established the dominance of the direct model, with all new Nio Spaces opened using the direct model, and owner-invested stores repossessed, according to the report.
Most of China's new car makers used a direct sales model similar to Tesla's at their inception. However, as they have scaled up, some have begun to introduce a dealer model.
Xpeng launched the Jupiter Project earlier this year to recruit dealers. Since the project's launch, Xpeng had received more than 1,200 applications to join its sales system, it announced on October 9 on Weibo.