Car sales

Death of a car salesman: How the Ford-Alibaba tie-up will change the way cars are sold in China

Automakers are experimenting with ways to reach consumers online, pushing the car-buying experience from dealership showrooms to people's living rooms through the use of the internet. That is redefining the role of traditional car dealerships.

PUBLISHED : Friday, 08 December, 2017, 8:03am
UPDATED : Tuesday, 03 July, 2018, 10:04pm

For many decades, people who wanted to buy a car went to a dealership to kick the proverbial tire and meet with salesmen whose mantra – always be closing – meant that a quick sale would follow.

That era is fast receding in the rear view mirror as consumers have increasingly moved on to comparison shopping websites to do their homework.

For a new generation of shoppers in China who are used to buying everything from shampoo to ski holidays online, buying big-ticket items like cars on the internet does not offer the sort of barrier that used to exist before.

Wang Xi, a 27-year-old property salesman, said he quit his job selling cars two years ago because of most everything can now be sold online.

“I think there’s a high risk of car salesmen losing their jobs,” said Wang. “You can buy a car from an online platform, without asking for a test drive, based on your friend’s recommendation … A robot can easily provide all the information about a car to customers.”

The McKinsey Global Institute, the economics research arm of consultancy McKinsey & Co, recently predicted that up to 800 million existing jobs would be automated by 2030.

The tie-up between the Ford Motor Company, the world’s third-biggest car brand by sales last year, and e-commerce provider Alibaba Group Holding may prove to be the bellwether of how car sales would evolve in the world’s second-largest economy.

Ford plans to sell passenger cars online in China via Alibaba’s Tmall e-commerce platform

New York-listed Alibaba, which owns the South China Morning Post, in October led a US$355 million funding round for SouChe.com, which sells used cars from dealers across China.

Ford and Alibaba’s three-year collaboration included exploring various retail opportunities – from pre-sales, test drives and leasing options – through the Chinese company’s online shopping platform Tmall.

That marks the latest example of how technology is set to seize a bigger role in the process of buying and selling vehicles in the largest car market on the planet.

Passenger vehicle sales in China are forecast to hit 25.6 million units by 2019, topping an estimated 21.2 million in North America in the same year, according to a recent Nomura industry report. Global sales during that period are expected to reach 101.5 million units.

Despite the dire prediction about robots taking over millions of people’s jobs in the future, some industry observers see the automation in China’s car retail market will be gradual rather than sudden, and that consumers will still value the human touch in buying cars.

Consumers at present can place their orders through a number of online car sales platforms in China, but they still need to visit a dealership to test-drive a vehicle and arrange delivery, according to a Ford dealer in the southern coastal city of Shenzhen.

“Car manufacturers already have a well-established offline sales network … They will lose control if their whole business moves to an online platform,” said Cui Dongshu, the secretary general of the China Passenger Car Association.

Alibaba doubles down on car industry to drive its ‘new retail’ strategy

Cui said car salesmen have certain other duties, including legal services and selling insurance and car parts, which cannot be easily taken on by robots. “So far, I do not see much success in selling vehicles online,” he added.

Still, other circumstances like staying profitable may help usher in a digital reboot for car dealers in China. A group of dealers for Kia Motors Corp’s imported cars recently sought 800 million yuan (US$121 million) from the Korean carmaker to cover losses incurred in maintaining their showrooms in the domestic market.

In 2015, German carmaker BMW agreed to a 5.1 billion yuan payout to help cover mounting losses of its distributors in China.

“If it works well, online sales will reduce costs for car manufacturers … That means car salesmen will have to transition into new roles,” said Victor Au, the chief operating officer at Delta Asia Securities. “With the price of vehicles decreasing, cars will become commoditised just like laptop computers. Many consumers buy their laptops online … You will see more people purchasing cars from online platforms in the future.”

Additional reporting by Zen Soo