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Zotye USA's plan to sell a China-made crossover in two years in the US addresses the common problems faced by consumers and dealers.
For consumers, executives at Zotye USA say they will offer straightforward pricing, online sales and affordable vehicles.
For dealers who decide to sell the Zotye Crossover, there is no demand for expensive dealers, which is what established car manufacturers usually demand.
Zotye (pronounced ZOH -tay) aims to "really turn things around," said Bob Pradzinski, a longtime executive of Hyundai Motor America, who will direct sales for the new company.
Pradzinski: Let it work for everyone.
Zotye USA was formed last month after the parent company HAAH Automotive Holdings of Lake Forest, California, signed a distribution agreement with the small Chinese automaker Zotye Automobile International Co. It plans to open 80 leading US markets and have 300 to 325 franchises. The first car, which is likely to be the T600 crossover sold in China since 2013, will go on sale in the fourth quarter of 2020.
But there is still much to do.
Pradzinski, Senior Vice President of Sales at HAAH and Zotye USA, and Duke Hale, a former Mazda and Volvo manager and now CEO of AHAH Automotive Holdings and Zotye USA, are recruiting dealers. Some dealers sign declarations of intent. The company declined to give their names or how many have registered.
About Zotye Automobile International Co.
- Origin: Founded in 2003 in Yongkang, China
- Acquired: 2016 for 11.6 billion yuan ($ 1.7 billion) from Jinma Co., a Shenzhen Stock Exchange listed company that manufactures parts and components for automobiles and construction machinery
- Leader: A group of professional managers sent by Jinma. The majority shareholder is the Jinma parent company Tech-New Group, a private industrial company. Yongkang-born technology chairman Ying Jianren and his family hold a 43.5% stake in Zotye.
- aspirations: Industry leadership in vehicle electrification, connectivity and autonomous driving to become an internationally competitive company that makes Zotye a global brand, according to its website.
- Export Plans: Around 40,000 vehicles this year, compared with around 25,000 in 2017
Zotye is not considering its own businesses.
"We really want to do this with traders hand in hand, I think this idea of trying to sell cars and satisfy customers and companies who say they will only do it online, I think that will not work "Pradzinski said. "They have to be customer-friendly, they have to be merchant-friendly, we also need to be supplier-friendly and employee-friendly, and the company has to work for everyone."
HAAH and Zotye USA intend to announce the first 20 dealers in about a month.
Hale and Pradzinski have held dealer meetings at the East and West Coasts, encouraging interested traders to contact them haahauto.com, They are looking for distributors with strong business, good sales volume and repair capability as well as high customer service results. While Zotye's focus is mainly on existing car dealers, this would apply to individuals with extensive retail experience.
Anyone signing up must also acknowledge that Zotye USA plans to go into the market in a different way than the typical franchisee, in terms of prices and customers.
"We want traders to be involved in the fact that we are in the Amazon era and traders need to change," Pradzinski said Automotive News, "You really need to shop in this process, people do not want the trouble anymore."
Pradzinski does not want customers in the Zotye stores to worry about haggling and not knowing if they have the best price. He wants to create an experience that customers will love instead of confronting them with the typical bombardments of salespeople as they rise.
"You have to change that," he said. "We have to have a very customer-friendly experience."
Traders will initially only have one vehicle for sale, a crossover that has not been released by the HAAH and Zotye representatives, but was identified as T600 on the HAAH website last week.
Zotye Automobile International Co., with a global sales of 317,000 vehicles last year and an ambition to become internationally competitive, said it intends to sell sedans and electric vehicles here in collaboration with HAAH after the start of the crossover in the US.
Dealers have realistic set-up requirements and a longstanding problem between dealers and car manufacturers. The approach will be simple and minimalist, Pradzinski said. Showrooms will contain red and silver colors, "plain and simple, but very, very functional and not very expensive." The signage is being reduced by expensive stake-and-monument signs, which some automakers require, he said.
Dealers can share the Zotye showroom with another brand or rebuild a used car building for use. A Zotye dealer might be able to have a satellite store in a mall or warehouse district that is not as expensive as a car hall, he said. The buyers of today are smart and know that the cost of a smart device in the price of the product are included, so Pradzinski.
"We will not need a Taj Mahals that will cost the dealers millions," he said. "I think that's the fastest way to build a brand."
Zotye is planning a website to give the customer "all the information you can imagine" about the vehicle, as well as information that is normally only available from the dealer, such as how their credit rating affects payments, said Pradzinski. Online sales are available to customers, but buyers would accept delivery from a dealer.
"We will not do anything online to take away the sale from a dealer," he said.
Pradzinski said the company is in negotiations with major lenders to serve the brand and intends to offer a guarantee.
Zotye faces "numerous" challenges as he prepares to sell to the US – including the risk of recession and tariffs on vehicles coming from China, "said Ivan Drury, Senior Manager of Industrial Analysis at Edmunds Shutting down consumers, even if the company partially or fully absorbs the costs, as Hale considered possible last week.
Marketing will be the key as the perception of products made in China varies, said Drury. And while the desire to function through customer service and straightforward pricing is different, there is still a widespread belief among consumers that negotiating saves money.
"The marketing approach is huge and highlighting these points is good, it really depends on the product at the same point," Drury said. "You could have a terrible experience, but still buy a car."
Rebecca Lindland, executive analyst at Kelley Blue Book, said Zotye will have to find risk-conscious consumers willing to buy from an unknown company. Attempting to penetrate the US also poses risks for the company and the dealers, she said.
"People just underestimate the capital investment needed to unlock the US market," Lindland said. "If you come out with a car, you're competing against a colossus, whether it's General Motors or Tesla, which is incredibly well funded, and you're asking traders to commit to that one product for a certain amount of time."
HAAH and Zotye officials admit that they have a lot to do in two years, but they have begun to work on government permits to start franchisees. Zotye has been working with a consulting firm on vehicle registration for several months and is "very comfortable". It will meet the safety, emission and other certification requirements needed to sell an imported vehicle in the US by the fourth quarter of 2020. HAAH and Zotye USA Vice President of Public Relations.
Hale had attempted to call the president of the National Automobile Dealers Association, Peter Welch, to reaffirm the company's commitment to the franchisees last week before Zotye's announcement last week, Hosford said.
NADA spokesman Jared Allen said that Welch had returned the call from Hale, but the two had no connection. The club learned about the company and its goals just last week.
Representatives of HAAH and Zotye plan to attend the NADA show in San Francisco in January, but Zotye may be too late to secure a place.
The company has a draft for a dealer contract, said Pradzinski, but would like to obtain input from dealers and NADA.
NADA has informally asked US retailers how they feel that a Chinese automaker is entering the US, and whether they would be willing to take on a franchise. The response has been broadly positive provided these automakers deliver high quality products, Allen said.
The Guangzhou Automobile Group met with dealers at the NADA show this year about the prospect of entering the US retail market next year. A Guangzhou spokeswoman said she had not announced any plans for the dealer network, but still intends to release the GS8 crossover for sale in the US by the end of 2019 or early 2020.
Executives who spoke at the Paris Motor Show last month are likely to put Guangzhou's schedule back to the first half of 2020, as the company is considering the tariff issues between the US and China.
Yang Jian contributed to this report.
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