Chinese Cars to Be Sold Online – Will It Work?

China’s a funny place from a Western perspective, the market is far more cost conscious and far less quality inspired. Big Western names have been spanked in the country by plucky but localised competitors, Google may have officially withdrawn from China over a spat involving censorship but it wasn’t making the inroads against local search engine Baidu either. Then eBay came and went after being thoroughly trounced by Taobao.

So the big question on everyone’s mind is; can Geely make a success of selling new cars on Taobao, even though they’ve already become enough of a success to Hoover up Volvo this year?

It’s a difficult one to ponder though; an Internet sales model for manufacturers is a fine line to walk.

Potential Problems

Internet Penetration – While almost every Chinese citizen in a first tier city has regular Internet access, which has become far less regulated (though users of Internet cafes still have to provide ID to use a connection, anyone with their own laptop can connect to wi-fi with no registration in places like hotels and coffee shops) a large chunk of the country still has no major access to the net.

Dealers – With a surplus on forecourts thanks to changes in the country’s tax regime this year, many dealers are struggling to shift large overstocks, how are they going to taobao 集運 respond to increased competition from an online presence? More to the point, how will they respond if Geely begins to pass on savings from using a cheaper sales channel to customers?

Customers – Buying a car is the second largest purchase after a house that many people make in their lives. This is particularly true for middle class Chinese who do not have the equivalent surplus wealth of Western families and the rate of change for upgrading vehicles is likely to be slower than established markets for a long time until individual earnings rise substantially. Are customers going to trust that kind of buying decision to an online area where they cannot test drive the car, or inspect servicing and support facilities?

The big advantage for Geely is that they may be able to move their entire sales model online, if they can satisfy customer resistance to this form of car purchasing. Chinese customers tend to focus more on price than any other factor, and while this may be bad news for the traditional forecourt dealer it could mean a total revamp of the supply chain with a focus on local test drive and service areas and enable huge efficiencies in manufacturing.

Chinese companies have so far been the greatest innovators in the local market place, the world should watch with interested eyes to see if Geely can become a great online retailer, as it is already a great car company.

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