Chinese EV manufacturers are increasingly and actively investing in having showrooms in plush malls
They are willing to pay huge rentals for the same.
In Shanghai, more than half of the plush malls have at least 1 EV showroom as a tenant or owner of a showroom. And more are in the pipeline as per top real estate service provider Jones Lang LaSalle Inc.
This trend, of malls having an EV Showroom, is being seen in another medium as well as large cities of China.
China is presently the largest EV market in the World. It is also a highly competitive one, with a host of players trying to get a footprint into it.
Every player, be it the big players like SAIC motor corp, Geely Automobile Holdings or even the new entrants like Nio Inc and Xpeng Inc are trying to showcase their products through showrooms in the Malls.
This is in spite of huge rentals to the tune of around $1 million a year for a showroom of area 200-300 sqm, in prime areas of China’s big cities, as per JLL.
“They pay big rent because they want to be seen,” said Zino Helmlinger, head of retail in eastern China at real estate firm CBRE Global Inc. “In China, you have many EV brands competing for a still very small market share, and every two-to-three months there’s a new car released. It’s crazy.”
The entry of the EV showrooms has been a godsend for the Mall Owners what with the premium Apparel, Footwear, and Electronics Showrooms increasingly marketing their products through the Online mode.
And with the EV players preferring the more premium 1st and lower floors, the Mall Owners are now increasingly being able to command more profitable rentals.
The first floor offers easy accessibility for providing display and test drives to the customers.
“There’s an overlap between the target consumer groups of electric vehicles and premium commercial developers,” said Vivian Zhu, director of retail at JLL Shanghai. “Those middle-class visitors who tend to shop for cosmetics or luxuries on the ground floor are also regarded as potential buyers for a Tesla or Nio.”
EV demand in China is expected to soar in the next few years; with some researchers like Canalys estimate growth in excess of 50% in 2021.
EV players like Nio are now moving from the earlier “Nio House” showrooms to investing in Malls.
A flagship outlet has been opened by Nio in the upmarket HKRI Taikoo Hui Mall in 2017, and this before its mass production had even begun.
The flagship outlet includes a library, an art gallery, and an open kitchen. All to lure the customers with the high-end lifestyle that its top-end EV Car too offers.
Nio has signed a five-year lease, monthly rent starting at 1.1 million yuan ($170,000) and rising to 1.7 million yuan in 2021, according to a public court document. However, in spite of the huge cost involved, 20 more Nio Houses will be opened this year.
And Nio is now also focussing on opening Nio Spaces, which are a tenth of the Nio House, which are typically showrooms without the display of high-end lifestyle visages. 120 Nio Spaces would be opened in 2021, it is estimated.
“We have significantly lowered the operating cost of Nio Houses,” CFO Steven Feng said on an earnings call last week when the company reported a wider-than-expected loss. “It’s only about 40 percent of the original cost.”
The expansion of showrooms into malls “is in line with automakers’ product development,” said JLL’s Zhu.
Companies that could not meet their plans for product launches and mass production have been seen fading away from the markets. For instance, Byton, which had its production plans delayed many times o.
ver and faded away, has seen its Shanghai Display room being replaced with the flagship store of Xpeng. The company delivered over 27000 vehicles last year.
“EV companies are now way more cautious with the location they open,” said CBRE’s Helmlinger. “Three years ago they were trying to break the market. Now, they’re very selective with the mall. It’s quality over quantity.”