Abstract: Seeing that the European and American markets are still slumbering and not making progress, by contrast, the rapid development of China’s auto industry in the past few years has far exceeded Wei Silan’s expectations.
Text | Li Xiyin
Editor | Zhao Cheng
▲ Alain Visser, CEO of Lynk & Co International (Europe)
Wei Silan, who has been working in cars for more than 30 years, feels something is wrong.
“I am shocked and confused,”: The business model of automobiles has not changed for 50 years – OEMs build cars, dealers sell them; in contrast, the change in consumer mentality has already been turned upside down; “It’s a bit hypocritical,” all cars At the moment when a company claims to be sustainable, only 4% of the cars sold are on the road until they are scrapped. How can it be sustainable?
It is true that the car has been upgraded and iterated, but the business model remains the same. In Wei Silan’s view, what the world needs is not a new car brand, but a new business model. We should start from consumers and think about products and business forms;
Wei Silan worked in the auto industry for 36 years, 7 years at Ford, 9 years at GM, and the next 7 years at Volvo, during which I witnessed the cooperation between Volvo and Geely.
There are three major trends in the field of consumption, Wei Silan said: First, consumers in various countries are willing to pay for the experience, rather than simply owning it; the logic behind this layer means that consumers are more inclined to share materials; second, the Internet of Everything The demand for consumers is getting stronger and stronger, and the journey is not only about the arrival, but also the experience on the road. Third, the importance of sustainability is becoming more and more obvious. Consumers pay attention to the earth’s ecology, and enterprises must move towards sustainable development.
To this end, Lynk & Co has launched a “subscription model” in Europe, allowing consumers to get a month’s right to use a car at a relatively low price. Everything is packaged for 550 euros, so you don’t need to worry about it; you pay monthly and can be terminated at any time. contract.
At first glance, in the autumn of 2022, all this is not as novel as when the Lynk & Co subscription model was first launched, and more and more car companies are following up, whether it is an old European company or a new Chinese car maker going overseas. But interestingly, Lynk & Co has a few chic explorations:
1. Lynk & Co encourages consumers to share their rented cars. Rent a car and make money! There are consumers who rent a car for 550 euros and collect rent for 900 euros, and they also make a profit. You know, in the usual view of traditional OEMs, this does more harm than good, with increased risks and brand discounts, which is not cost-effective, but Lynk & Co emphasizes the efficiency of vehicle use.
2. Product selection is simplified. One car with two colors, simple and rude, never tangled. Many people have choice anxiety. In my opinion, less is more. This kills two birds with one stone, which not only reduces operation and maintenance costs, but also avoids user entanglement and promotes signing.
3. Strong offline social attributes. Lynk & Co requires the experience store to be cool and interesting, a living room and play place for friends.
This three-pronged approach gave Wei Sila enough confidence: “You can build a company online, but it is absolutely impossible to build a brand online. So you can copy our products, copy our subscription model, and even copy our sharing. model, but there is absolutely no way you can replicate that experience.”
The data shows that the number of Lynk & Co European subscription members has reached 150,000 (including car purchasers and subscription car owners), and 28,000 01 PHEVs have been put into use, which are shared and sold among the customer base. More than 20% of Lynk & Co vehicles running on European roads have basically used the sharing function.
Frankly speaking, in the author’s opinion, the subscription model is difficult in three points: first, when the thinking is broken, the so-called “you can only see when you think, and you can go when you see it”, you need to be full of faith in the future of this new model; second, In terms of business model, there must be a package of plans and system capabilities to support it, and it must be able to calculate a large account, at least in the east and in the west. The added value is the highest, but the risks and challenges are also the greatest, and the pressure on enterprises is not small.
Because of this, a car company that can really implement the subscription model can gain a lot: exposure and experience in the early stage; orders and sales in the mid-term; in the long-term, an updated business model will more thoroughly connect car companies and users. barrier; in other words, a new species is born. Then, just give him some time.
After three years, Wei Silan returned to China again. He looked at more and more tents, canopies, and cooking utensils on the grass by the river. He felt that the consumption ecology was accelerating, and the car subscription and its business ecology were accelerating. The media including “Finance Auto” shared their insights into the model exploration in the field of car sharing in the past few years. The interview is excerpted as follows, slightly abridged.
▲ Alain Visser, CEO of Lynk & Co International (Europe)
How does the subscription system work?
Q: What is the sales forecast and market share target in the European market next year?
Wei Silan: The goal has been overdue. Currently, the demand for cars is in short supply.
Q: When Chinese brands enter Europe, what kind of problems will they encounter?
Wei Silan: The biggest difficulty we encountered was that our model was different.
When you do something completely different from the way everyone does it, you are bound to encounter many difficulties: how many models do you need? No. How many colors? No. Configuration to be different? No. To have a traditional dealer network? No. We have received too many questions and ridicules, and many people are waiting to see our jokes.
Looking back on the past six years, my deepest experience is: no matter what difficulties and obstacles arise, don’t give up easily. The toughest question for me? That’s too much questioning, they think we’re crazy – only one car, two colors, “subscription”, why? Success on what? These questions have always been around, and they have persisted in the voices of doubts to this day.
In the past six years, as many friends as I have made, I have made as many enemies as I have. The ratio of friends to enemies is 1:1. I have been fighting tenaciously against the holders of the other opinion, and I have been persevering.
I can’t say who is right and who is wrong, but I can confidently say that over the past six years, I have seen my views validated, and I have made many close friends who are willing to embrace the new model.
In particular, I would like to point out that Lynk & Co is part of the Geely Group. We are members of the Geely family, and many of the things we plan to do may be completely different from the practices of other brands under the group. Special thanks to Geely for giving us a lot of support and giving us enough courage to experiment and try all kinds of new styles.
Q: There are too many moral hazards behind the subscription model, such as car insurance loss assessment, data privacy, and car owners subleasing to earn the difference. How are these problems solved?
Wei Silan: Issues such as moral hazard and data privacy and security protection are very difficult problems to solve in Europe, as in China. The GDPR itself, as you know it, is a very hot topic in Europe, and the discussion is in full swing.
Q: There is a counter-intuitive thing. China has more digital soil and e-commerce consumption concept. Why is the subscription system ahead of Europe?
Wei Sila: The reason why Lynk & Co first launched the subscription model in Europe is because the local people have been buying cars for 100 years. They are very tired of the original single purchase model and are ready to try new business models and new cars. model.
At present, Chinese consumers’ demand for the subscription model is not so strong. At the beginning of the establishment of the Lynk & Co brand, a survey was conducted in Beijing, Shanghai and other places to see the acceptance of the subscription model among young people. It was found that young people were not keen on it, and they should buy a private car if they have money.
However, based on my experience in the Chinese market in the past few years, I think that what takes 10 years to complete in Europe may only take one year in China. I believe that Chinese consumers may soon adapt to the subscription model.
Another point I would like to point out in particular: for OEMs today, concepts like car sharing, sharing or subscriptions may make them uncomfortable. They prefer to sell the car directly and get the money back. From this perspective, there is a certain degree of conflict between the concept of car sharing and the sales KPIs that OEMs want to achieve.
Q: After Lynk & Co launched the subscription model in 2016, there are many imitators. What are the advantages of Lynk & Co?
Wei Silan: In 2016, Lynk & Co just launched the subscription model to the market, and other automakers followed suit and launched the so-called subscription model.
In fact, it’s more like a short-term rental model. No other car company can offer a monthly subscription like us. Other car manufacturers have a minimum lease term. This is probably more marketing than a subscription service in the true sense of the word.
There are also many small-scale travel service companies in Europe. Some do sharing, some subscribe, and some cooperate with international giants. Some are successful and some are not good.
Lynk & Co can occupy a place in the European travel service industry because of the combination of boxing: “subscription system” service + sharing function + service, such as experience store, the ability to recruit members, etc. The organic combination of the three in one company does not mean that players do not. Many, this is precisely the biggest innovation of Lynk & Co.
Q: What is your ultimate vision for the future?
Wei Silan: I think the protagonist of the auto industry will definitely change, from OEMs that make cars to car travel service brands. I often say that if you don’t think about progress and change in the automotive industry, ten years later, many well-known car manufacturers will only be reduced to automotive suppliers.
Analogy to the aviation industry, do you want to be Boeing or Lufthansa? As a consumer, do you care whether you are flying on an airliner made by Boeing or an airliner made by another brand? It’s more about which airline you fly, and I think the development of the auto industry will be the same.
For Lynk & Co, we also hope that our ultimate goal is to become a service brand for future travel, and at the same time be able to provide our own products, not just a product-based company.
Where is the difficulty in exporting Chinese brands?
Q: The influx of Chinese car companies into Europe does not seem difficult at first glance. As a past person, do you have any advice for other Chinese brands to enter Europe?
Wei Silan: After three years of absence, I am deeply shocked to return to China. I have seen the rapid development of China’s auto industry in the past 20 years, the impact it has brought to society and the changes in society.
Three years ago, 25% of the cars on the street were local Chinese cars, and the quality and design of Chinese cars are constantly being optimized. Today, half of the cars on the road are produced locally in China, and the coolest car designs come from local Chinese car companies. At the same time, I see that the European and American markets are still sleeping and not making progress. The speed of China’s development in the past few years is indeed unexpected to me.
Looking back at history, it took a long time for Japanese and Korean cars to take root in Europe. In theory, it will take a while for China’s local cars to truly gain a foothold and be known and accepted by everyone.
There is an arrogant mentality in Europe and the United States: they always feel that their cars, technologies and brands are far better than car companies in other countries. I think that sooner or later, Chinese companies will achieve breakthroughs and rank among the top in the European and American markets by virtue of their technical strength and constantly improving design awareness.
In my opinion, the difference between future car companies is not the product, but the experience. Lynk & Co pays great attention to creating a unique experience and telling a good brand story, so that the so-called traditional car companies can’t catch up.
Q: There are two routes for Chinese cars to go overseas. The first is the luxury brand’s high-profile, and the second is the affordable route. Which is easier to succeed?
Wei Silan: It seems a bit pedantic to make some subjective distinctions between mainstream luxury and non-mainstream luxury market segments for these car brands. My judging criteria is only one: Does the car produced meet consumer expectations?
If you think this car will be popular, you can naturally set the price a little higher. If the price is set relatively high, people are willing to wait, which proves its intrinsic value. But if you just subjectively label the car as luxurious and elegant, I think this is a very immature performance.
Q: At the Paris Auto Show, Stlantis CEO Tang Weishi called for higher tariffs on Chinese cars. Will this bring huge risks to Chinese car companies going overseas?
Wei Silan: Although I don’t pay special attention to this matter, I don’t agree with such extreme views. I feel that establishing an absolute dominance in market competition is not by suppressing competitors, but by trustworthy technologies and products.
The EU has just announced to impose relatively high import tariffs on products such as plastics and aluminum. In my opinion, this is not conducive to the long-term development of the market and the industry, and violates the basic principle of fair trade.
The reason why we can see similar arguments in the market is that it reflects from the side that the European market is quite afraid of the excellent products and excellent companies launched by the Chinese market in the past few years. In my opinion, Europe should reflect on how to do its job well, rather than use another method of repression.
▲ Alain Visser, CEO of Lynk & Co International (Europe)
Can you make money, how do you make money?
Q: The experience store looks very cool, and it also undertakes social attributes, so what is the cost?
Wei Silan: After comprehensive calculation, we found that the overall construction cost and operating cost of the experience store are much lower than the operating cost of traditional dealers.
Q: What is the profit point of the subscription-based business model established in Europe? What’s so special about the new business model?
Wei Silan: The profit source of traditional OEMs is to buy low and sell high, that is, to buy cars at a lower price and sell them at a higher price. For us, part of the value of the car is recovered in the form of a monthly fee through the subscription model. When the residual value of the car is close to the cost of the car, the car will be recovered and the second-hand car will be used. form to sell the car. This profit margin is even more impressive.
The only difference is that the money in the traditional OEM model is directly recovered, while the return of cash in the subscription model is a long-term process. The operating cost of the subscription model is relatively fixed, while the operating cost of the OEM in the traditional OEM model is variable, because they are also earned by the dealers for a middle price difference. Our operating costs are one-third of the operating costs of ordinary OEMs.
Q: European consumers are conservative. How did our subscription model and product positioning impress them?
Wei Silan: There are indeed many mature and even conservative consumers in Europe. These technology controllers are very interested in the performance and technology of the car itself, and some of them are not the target audience of Lynk & Co.
More than 80% of consumers in Europe will buy their own private cars for travel, and 20% of them want to play something different, not just cars, we just want to satisfy the latter. There were a lot of big companies that put their fishing rods out into the ocean, and there were no hooks in the small ponds, no people gathered, so we were very alone.
Although it is only 20% at present, this number and proportion are constantly rising and rising rapidly. Therefore, Lynk & Co is ready to meet the needs of this relatively small but rapidly rising consumer group.
Editor in charge | Zhao Cheng
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