The direct-operated stores are experiencing a major retreat. Brands such as Denza, HarmonyOS Smart Mobility, and Zeekr are converting their stores in third- and fourth-tier cities to franchise models.

It may become difficult to see direct - sales stores of domestic new - energy vehicles in non - first - tier provincial capital cities.

Entering the fourth quarter, many new - energy vehicle brands have announced extensive channel reforms. On social platforms, many sales employees of Denza in Hebei, Henan, Zhejiang, Guangdong and other regions said that their direct - sales stores were closed or transferred to dealers. One of the salespersons told "Power Plant" that Denza might switch to a dealer channel nationwide and only keep direct - sales stores in first - tier provincial capital cities.

Hongmeng Zhixing has also begun to extensively downsize its direct - sales stores. Reforms have started in Guangdong, Sichuan, Jiangsu and other places. Relevant people revealed to "Power Plant" that Hongmeng Zhixing's direct - sales stores will also only be retained in first - tier cities in the future. Many Hongmeng Zhixing salespeople said that currently most of their stores are in the form of dealers, and many of the so - called direct - sales stores are quasi - direct - sales, with very few being purely direct - sales.

An employee of a Hongmeng Zhixing direct - sales store in Guangdong told "Power Plant" that sales staff from the stores in his city that are selected to be converted to dealer stores will be transferred to other direct - sales stores. For example, if Store A and Store B each have 10 salespeople, and Store A is converted to a dealer store, all of its salespeople will be transferred to Store B. That means Store B will have 20 salespeople, which will increase Store B's sales target, thus causing fierce competition among salespeople and achieving the purpose of optimization.

Zeekr is also accelerating its adjustment. A store manager of a Zeekr direct - sales store in Zhejiang said that he just joined in June this year, and within a few months, the direct - sales system began to transform into a dealer model. "This change is mainly concentrated in third - and fourth - tier cities." In fact, this move was not without warning. Lin Jie, the senior vice - president of Geely Automobile Group and the vice - president of Zeekr Technology, clearly stated in July that Zeekr adheres to the direct - sales model in first - and second - tier cities; in the third - tier cities where it has been deployed, areas with better performance still use the direct - sales model; while in the blank third - and fourth - tier cities, the agency model will be used.

In May last year, Avita had converted 90% of its stores to the distribution system and only retained direct - sales stores in core first - tier cities. XPeng Motors started the authorization model as early as 2023 and also closed many direct - sales stores this year. Li Tian (a pseudonym), a salesperson at an XPeng direct - sales store in Zhejiang, told "Power Plant" that the manufacturer hopes that direct - sales employees will transfer to dealers to reduce compensation costs. However, due to the decrease in income, more employees prefer to take the "n + 1" compensation and leave.

Withdrawing from the direct - sales model has become an industry consensus. The latest statistics from Jielanlu show that in the first three quarters of this year, automobile stores in commercial areas have shrunk across the board. Compared with the first quarter, in the third quarter, Denza reduced 34 stores in commercial areas, Lynk & Co reduced 36, XPeng reduced 37, BYD's Ocean Network reduced 63, and Dynasty Network reduced 84... The decline in the number of stores in commercial areas is a direct sign of the tightening of the direct - sales system.

In recent years, the enthusiasm for the direct - sales model of new - energy vehicles has gradually cooled down. From the "pure direct - sales" model to the "direct - sales + distribution" hybrid model, now some brands have even returned to the "pure distribution" model.

High Costs, Price Disorder, and Service Decline: The Direct - Sales System Is in a Vicious Circle

The direct - sales model incurs high costs. According to industry insiders' calculations, for a direct - sales exhibition hall of about 200 square meters, the monthly basic expenses such as rent, management fees, parking fees, and employee salaries are about 400,000 yuan, and the annual operating cost is as high as 4 million to 5 million yuan. If a brand deploys 300 direct - sales stores nationwide, the cost of just maintaining operations will be at least 1.2 billion yuan.

These investments may not necessarily result in increased sales. Although some direct - sales stores are responsible for brand exposure, they have been "burning money" for a long time, with monthly sales in the double - digits or even single - digits. "Although dealers need to make a profit from selling cars, compared with the huge operating costs of direct - sales stores, dealers are obviously more cost - effective," Li Tian told "Power Plant".

As the market matures, the value of direct - sales stores' "losing money for popularity" is constantly declining. The new - energy vehicle industry has entered a period of rapid development. Data from the China Association of Automobile Manufacturers shows that in October this year, the sales volume of new - energy vehicles in China accounted for more than 50% for the first time, reaching 51.6%. Against this background, many brands already have sufficient market recognition, and the incremental effect of the direct - sales system on brand and experience has begun to decline marginally.

More fatal than the cost is the price war that has lasted for two years. In September 2025, the average transaction price of new - energy vehicles in China dropped to 158,000 yuan, breaking through 160,000 yuan for the first time. Data from the China Passenger Car Association shows that in September 2025, the sales profit margin of the automobile industry dropped to 4.4%, hitting a recent low; from January to September 2025, the industry profit margin was 4.5%, which, although better than that in 2024, is still at the second - lowest level in history. With the profit margin compressed to the extreme, closing direct - sales stores has become an important means for enterprises to recover.

A dealer calculated an account for "Power Plant": If a brand has 5 models and 300 franchise stores, and each store pays a deposit of 5 million - 10 million yuan, the deposit income alone will be at least 1.5 billion yuan. Then, according to the calculation of "4 configurations for each model, 3 colors, 30 units of inventory per vehicle, and a wholesale price of 100,000 yuan", the total value of the inventory in the hands of franchisees can reach 4.5 billion yuan, contributing a total of 6 billion yuan in income to the automaker, and the sales and after - sales costs are borne by the dealers. This is a huge temptation for automakers.

Opening the dealer channel is bound to accelerate the decline of direct - sales stores. Although automakers take some measures to restrict dealers from lowering prices, in fact, direct - sales stores are still deeply affected. Li Tian told "Power Plant" that for the more than 100,000 - yuan XPeng MONA M03, dealers sell it for a few thousand yuan cheaper than direct - sales stores. Another salesperson at a direct - sales store in Guangdong said that an authorized store of XPeng P7+ directly gives customers a rebate of 5,000 yuan. "With such a big price difference, it's really hard to choose the direct - sales store."

A large number of consumers have developed a behavior pattern of "looking at cars in direct - sales stores and making purchases from dealers", which further drains the blood of direct - sales stores. Automakers will make cuts based on the long - term losses of direct - sales stores, forming a cycle of accelerating the elimination of direct - sales stores.

The unstable survival state of direct - sales stores will directly lead to high employee turnover and execution deviations, thus shaking the most basic service quality of direct - sales stores. On social platforms, a consumer said that after placing an order for a certain brand of car, he was pulled into a 6 - person service group including the salesperson. However, the responsibilities of other people in the group except the salesperson were unclear, the communication was chaotic, and no one took the initiative to follow up on the order for many days after it was submitted. The vague service process and unclear responsibilities have made the "experience advantage" of direct - sales stores exist in name only.

Why Keep Direct - Sales Stores in Core Cities?

Although most automakers can no longer obtain sufficient benefits from the direct - sales system, they still choose to keep direct - sales stores in first - tier cities instead of completely switching to a full - dealer model. The reason is not complicated.

First of all, direct - sales stores in first - tier cities serve as the front - end window for direct communication between the brand and consumers, enabling them to more timely and accurately grasp user needs and market feedback, which provides an important basis for product iteration. Secondly, first - tier cities have a large population flow and high vehicle ownership, so direct - sales stores are more likely to break even and can maintain brand exposure and image.

In addition, direct - sales stores in first - tier cities have significantly stronger profitability in the after - sales system. Taking Tesla, which adheres to the direct - sales model, as an example, according to AC Auto, Tesla's body - and - paint repair centers in first - and second - tier cities are mainly direct - sales, while in fourth - and fifth - tier cities, it opens up authorization. The large vehicle ownership and high number of accident vehicles in first - and second - tier cities ensure sufficient business volume for direct - sales body - and - paint repair centers.

Tesla can allocate the flow of accident vehicles nearby through its APP and 400 hotline, and direct - sales stores have priority. At the same time, Tesla's new - car insurance premiums are relatively low, and it can directly communicate with insurance companies to obtain a higher damage assessment price, making the profit level of direct - sales stores significantly higher than that of authorized stores.

Financial report data also proves its after - sales ability: In 2021, Tesla's automotive service revenue was 3.8 billion US dollars, accounting for 8% of its total revenue, with a gross loss rate of 2.7%. By 2024, its automotive service revenue had increased to 10.53 billion US dollars, accounting for 10.8% of its total revenue, and the gross profit margin had increased to 5.8%.

The repair barriers of new - energy vehicles also give direct - sales after - sales an inherent advantage. Due to the high integration of the whole vehicle, highly customized components, and strict software encryption, third - party repair shops can hardly perform operations such as programming and data import. Direct - sales stores adopt a "replace rather than repair" model, and the repair and replacement costs are significantly higher. According to industry feedback, the direct - sales after - sales quotes are often 2 to 3 times that of third - party repairs.

This article is from the WeChat official account "Power Plant". Author: Zhai Fangxue. Republished by 36Kr with permission.