Why XPeng Is Embracing a Dealership Distribution Model with Zhongsheng Group

Xpeng Inc. - ADR XPEV is seeing the virtue in the time-tested distribution model of legacy automakers, going by a release from the company late Thursday.

What Happened: XPeng said it has entered into a memorandum of understanding with Zhongsheng Group to establish a long-term strategic partnership that will serve to accelerate smart electric vehicle adoption in China.

Zhongsheng is a China-based automobile dealer, having a nationwide dealership network with more than 5 million customers across China.

Xpeng hopes to leverage Zhongsheng's well-established dealership network and expertise in serving consumers for mid-to-high-end automobiles to further accelerate its sales growth, while strengthening its after-sales services capabilities.

Related Link: Why This Nio, Xpeng Analyst Is Bullish After Q1 EV Delivery Updates

Through the partnership, Zhongsheng will invest in and operate authorized XPeng branded dealership outlets to provide smart EV sales and services. These facilities will be first launched in tier-1 or high-potential cities in China within 2021, the companies said.

"The partnership will also further enhance our brand awareness, making our Smart EVs accessible to a wider range of customers. I believe the long-term strategic partnership with Zhongsheng will strengthen our leadership in the fast-growing Smart EV sector in China," said He Xiaopeng, chairman and CEO of XPeng.

Why It's Important: XPeng is operating in a highly competitive and crowded EV market. It recently launched its third mass-produced model, named P5, a LiDAR-equipped sedan model.

Thus far, the company has been adopting a direct selling model, affecting sales through physical locations in more than 50 cities in China, and also online mode. In early April, CnEVPost reported that Xpeng had officially began selling its EVs on Dewu, a local trading platform for trendy items.

All these points towards are rather concerted efforts at staying ahead in the highly competitive EV race.

XPEV Price Action: Shares were down 1.50% at $30.93 Friday morning.

Related Link: XPeng Proposes EV Manufacturing Plant In Wuhan

(Photo: P5, XPeng)