Chinese Car Buyers Embrace Online Sales, Dealers Still in the Loop

Car Scoops. January 11, 2015

E-commerce is nothing new, especially in what is probably the world’s most connected country: China. The thing is, Chinese are embracing online sales for new cars, too – and that’s good for business.

Local automaker Geely estimates that it has sold nearly 3,000 units in 2014 online five years after first launching its e-commerce website. “The impact of Internet firms has been a major success for the company”, company spokesman Ashley Sutcliffe said.

Paul Hu, Volkswagen Group China’s chief marketing officer for Greater China and ASEAN, is even more buoyant: “E-commerce in the automotive market is taking off”, he told Wards Auto. “In my personal opinion, online sales in the total car market in China will account for 10 percent in the near future.”

Still, traditional dealers are not left out of the game. One of VW’s joint ventures, Shanghai Volkswagen, is selling cars online through a number of websites; customers place the order in one of the sites but have to close the deal and pick up the vehicle from a dealership.

Kyle Dickie, CEO of dealership best-practices consultancy Sewells Group, thinks that “there is some disruption to come to the distribution model, but it is not imminent. In China, there is an unusually high level of trust still placed in the sales consultant. Consumers want to interact face to face.”

The “disruption” mentioned by Dickie are smartphones. Right now, China is estimated to have more than 500 million smartphone users who, naturally, use their devices buying stuff online. Beijing-based iResearch forecasts that 2014 online retail sales in the country increased by 45.8 percent to 2.76 trillion RMB (US$444 billion).

“Empowered with technology, consumers of mobility services are likely to make choices other than what the automakers and their dealers are offering today”, commented Bill Russo, the managing director of the Gao Feng consultancy firm.

In other words, e-commerce may bring customers to the dealerships – they just might not be interested in the same vehicles the dealer and the brand want to promote.