NEVs' Tier-3 Conundrum: Thin Retail Networks, Sluggish Conversions, Low Brand Recognition

In 2021, when the term "new energy vehicle" was still relatively unfamiliar, I drove the BYD Qin PLUS DM-i back to my hometown of Zhanjiang, Guangdong, for the Spring Festival. My parents were even astonished by the "green license plate on a car."

Four years have passed, and in Zhanjiang, a third-tier city, with the increase in penetration rate, most people in Zhanjiang, including my parents, have become quite accustomed to new energy vehicles.

This is partly thanks to the explosive sales of BYD. The Qin PLUS series began to replace fuel vehicles as the main force of ride-hailing cars, playing the role of an "evangelist" for new energy vehicles. Similarly, the GAC Aion AION S and AION Y, which are also favored by ride-hailing drivers, have contributed significantly to the popularization of the new energy vehicle concept in small cities.

However, the "popularization of new energy vehicles" in small cities can never be compared with that in big cities.

According to data from the Passenger Car Association and the China EV100, by the end of 2024, the penetration rate of new energy vehicles in first-tier cities was between 52% and 55%, and in second-tier cities, it was between 46% and 50%; while in ordinary prefecture-level cities, some third-tier cities in the Yangtze River Delta and the Pearl River Delta had a penetration rate of around 40%, and in central and western prefecture-level cities, it was about 28%.

The penetration rate of "new energy vehicles" is still like this, and in third and fourth-tier cities and other lower-tier markets, the scarcity of "new force" models is comparable to that of "giant pandas".

This time when I went back home for the Spring Festival, a big feeling was that the new force models visible on the road, such as Xiaopeng, Li Auto, NIO, Aito, and ZEEKR, were all hanging out-of-town license plates. The proportion of local new energy vehicles has increased in terms of perception, but they are mainly ride-hailing cars.

Is it true that in Zhanjiang, a third-tier city with a permanent population of 7 million and a GDP ranking 12th in the province in 2023, new force car manufacturers have no place at all? How do local residents in Zhanjiang treat new force car manufacturers?

In order to find the answers, I took advantage of the Spring Festival to chat with potential car buyers, car owners, and front-line salespeople, and I got some interesting conclusions and thoughts.

Tier-3 Markets Disfavor EV Upstarts?

Meeting with relatives and friends is a traditional activity during the Spring Festival. As they have started families and settled in their careers, they have begun to express their intention to change cars. However, when it comes to discussing "which car to change to," their opinions are not consistent, even though they have already put down roots in Zhanjiang.

Only considering fuel-powered vehicles

As a lifelong resident of Zhanjiang working in his hometown since graduation, 28-year-old Huan became an Audi A4L owner in 2019 through family support. The arrival of his first child has now catalyzed his desire to upgrade to an SUV.

While EVs have become ubiquitous across Zhanjiang's streets, Huan remains indifferent to the electrification wave. To this conventional car buyer, vehicles serve purely functional purposes - his 5-year-old sedan has accumulated merely 40,000 km mileage.

Contrary to expectations, his gaze has settled on Jaguar's F-PACE P400. "Online research shows Jaguars offer steep discounts with premium configurations. The 3.0L engine particularly appeals to me - it delivers distinctive road presence," Huan explains.

Decoding the Purchase Drivers:

1. Spec-driven Value PropositionPrioritizes high displacement (3.0L) over powertrain type

2. Perceived Bargain PsychologyAttracted by luxury brand's atypical discount strategy

3. Feature-to-Price RatioMistakenly equates temporary promotions with fundamental value

Objectively speaking, however, the Jaguar F-PACE P400 doesn't offer a very high cost-performance ratio.

In terms of pricing, the Jaguar F-PACE P400 is priced close to 500,000 RMB after discounts;The "3.0L displacement power" that my friend has his eye on can only output 400 horsepower with the assistance of a 48V mild-hybrid motor.The claim of "high configuration" is also untrue. For a vehicle priced close to 500,000 yuan, basic features like the power-operated tailgate and heated steering wheel are optional, let alone advanced intelligent functions such as "high-level autonomous driving."

Perhaps the Jaguar F-PACE P400's "high cost-performance ratio" is built on the premise of horizontal comparisons with internal combustion engine (ICE) vehicles, as well as within an "information cocoon."

When we include new energy SUVs in the comparison, it becomes evident that elements like "performance" and "power" that Ah Huan cares about are no match for the "dual-motor" technology.

A better product fails to win in the comparison for one simple reason: it has "never been included in the comparison." Ah Huan admits frankly that since none of his colleagues or friends use new energy vehicles, and he has no exposure to "new force" automakers, he himself pays zero attention to new energy models.

Faced with the "overwhelming" advantages of a new energy flagship model like the AITO M9, Ah Huan did initially flicker a hint of surprise. However, his final reaction to me remained one of "skepticism."

Huan stated that he may visit offline stores to experience domestic high-end new energy SUVs in the future, to see if they live up to the "exaggerated claims" I described. For now, however, he remains more interested in ICE (Internal Combustion Engine) SUVs—after all, within his social circle, "3.0L displacement" serves as a more recognized conversation topic among friends and colleagues.

Insufficient Prestige

Uncle, who just turned 51, shares an almost identical attitude to Huan when it comes to car replacement—with strikingly similar rationales.

His decade-old Camry is nearing the end of its service life. When discussing candidate models, his top choices are the Lexus ES200 or Mercedes-Benz C-Class.

Would he consider a new energy vehicle (NEV)? His answer is definitive: "NEVs? You mean those DiDi cars and taxis on the road? They’re too low-prestige—even less comfortable than my old Camry. Why switch to those?"

When I explained that NEVs now include premium models with experiences on par with Lexus or Mercedes, he showed little interest.

"I haven’t seen these cars in Zhanjiang, and none of my friends have mentioned them—I don’t know much about them," Uncle said.

Indeed, unlike Guangzhou, premium NEVs like the Li Auto L9, AITO M9, and NIO ET7 are rare on Zhanjiang’s streets. Older generations, without proactive exposure, remain entirely unaware of their existence.

With low vehicle ownership rates for new force brands in small cities, brand visibility is naturally limited—let alone "brand appeal." This vicious cycle ensures new force brands will remain overlooked and unrecognized in small cities for the foreseeable future.

There are exceptions: models like the Xiaomi SU7 demonstrate strong "cross-circle" potential. After returning to his hometown in Hunan, a colleague found friends and middle-aged relatives (cousins, etc.) had heard of Xiaomi Auto, with some showing significant interest.

Yet across China’s automotive market, the Xiaomi SU7 remains the only model generating "nationwide buzz"—hardly enough to significantly boost NEV upstarts’ brand awareness in small cities.

Disruptive Choice

The "tipping point" may lie with young professionals who worked in tier-1/tier-2 cities before returning to their hometowns.

Another friend, Xiaobo, previously worked at a public institution in Dongguan and transferred back to Zhanjiang three years ago. Unlike peers who stayed local after graduation, Xiaobo is set on the Zeekr 001 for his next car.

"When I was still in Dongguan, I visited a Zeekr store—the 001 left a profound impression," he said.

Around 2021, the Zeekr 001 gained popularity for its luxurious interior and shooting brake design. Its striking aesthetics were a key reason Xiaobo was drawn to the model.

After returning to Zhanjiang, however, Xiaobo prioritized buying a home and starting a family—car replacement is planned for 2026, pending a job adjustment.

Compared to Ah Huan, Xiaobo demonstrates significantly higher endorsement of NEVs, particularly new force brands.

"The most important thing is how the car drives and its features—there’s no ICE vehicle that can compete in these aspects. The Zeekr 001 has top-tier audio, seating, and entertainment systems; plus, the power is exhilarating," he said.

While the prevailing view argues "buying NEVs is buying intelligence" (prioritizing advanced driver-assistance systems), Xiaobo remains indifferent—he has never tested intelligent driving.

"As long as the car is fun to drive, that’s enough. I’ve seen videos of 'autopilot' accidents online—it still feels safer to drive myself."

On practical details like charging convenience? "Haven’t thought about it yet." Why not Tesla? His reasons align with expectations: "No novelty, interior feels like a 'bare apartment,' and features are underwhelming."

Overall, Xiaobo represents a small but significant segment of small-city residents who no longer view traditional ICE vehicles as the sole option—they are beginning to recognize the advantages of new force models.

Younger demographics have gone a step further, choosing new force brands as their first car. Yet this transition is not without challenges.

Adopting an NEV is no easy feat

On the Winter Solstice of 2024, my cousin—who had just started working a year prior—posted on social media about buying his first car.

Living in the urban district but working in a county-level city, he decided to purchase a vehicle for weekend commutes home.

His choice:eπ‌ 007—a compact sedan with relatively low visibility (2,099 units sold nationwide in December last year).

This came as a surprise—I had expected my cousin to opt for a "safe, no-regret" ICE vehicle or a "popular model" like the BYD Qin/Seal 06. He revealed that choosing eπ‌ 007 was a "calculated decision" after careful trade-offs.

difficult decision

My cousin, who studied in Guangzhou and returned to work in Zhanjiang, has no particular attachment to ICE vehicles. Conversely, his four years in Guangzhou exposed him to NEVs, and online promotions/discussions solidified NEVs as his initial preference.

However, when car-shopping in Zhanjiang, budget constraints made the process less straightforward.

First, purchasing a vehicle in a tier-3 city like Zhanjiang lacks convenience.

"In Zhanjiang, you basically go to Haitian Auto City (suburban Zhanjiang)—they have brands like Wuling and BYD, but not as comprehensive as Guangzhou."

My cousin had no "target model"—his automotive knowledge was limited. Within his budget, he rejected BYD: the Qin series was too "ride-hailing oriented," and Ocean Network models didn’t align with his design preferences.

Never having owned a pure EV, he sought the "range security" of a fuel tank and wanted to avoid frequent charging.

Finally，he filtered by "150,000 yuan budget," "sedan," and "hybrid," selecting the Dongfeng Yipai 007 top-spec range extender version for its aesthetics and "better value proposition."

"Overall, I’m satisfied—good features, stylish design. But many hyped EVs online aren’t available in Zhanjiang, and buying in Guangzhou/Shenzhen isn’t practical. This was the best option."

Is this a "compromise"? He remains noncommittal.

incomprehension

Beyond objective limitations in vehicle selection, parental opinions also posed resistance.

Recalling early Car purchase discussions, my cousin revealed his parents initially preferred an ICE vehicle for his first car.

Two key concerns:

1. NEV unfamiliarity: Fears of battery fires and safety risks.

2. Brand unfamiliarity: "Dongfeng Yipai" was unknown—why not choose familiar Joint venture brands(Volkswagen, Toyota, Honda) for a 100,000+ yuan budget?

"I spent weeks educating them—explaining NEV advantages, then took them for test drives. After experiencing the car’s interior and fuel efficiency, they relented: 'It’s your decision.'"

"Now, after a month of ownership: satisfied with the premium interior and low fuel use. If I’d listened to them (e.g., VW Sagitar), I’d miss out on this experience."

In a sense, eπ‌ can be considered part of the "new force" cohort. However, my cousin’s car-buying journey highlights a critical challenge for new force brands in tier-3 cities: limited dealerships, low brand awareness, and weak recognition create lengthy, tortuous paths to convert consumers.

Sales Have Their Own Struggles

Xiaomi Sales: All Eyes, No Buys.

In 2024, Xiaomi—a "star automaker"—opened its first exhibition hall in Zhanjiang just before the Lunar New Year, choosing the bustling Wanda Plaza in the city center as its location.

Based on my observations during the Spring Festival holiday, Xiaomi's car exhibition area, though set up in the atrium and not a traditional showroom, drew significantly larger crowds than neighboring Zeekr, Denza, and Li Auto stores. The Xiaomi SU7 undoubtedly lived up to its reputation as a "star model."

Interestingly, Xiaomi sales staff shared that while daily foot traffic has been high since the Spring Festival holiday, few visitors have shown genuine purchase intent.

"Conservatively, we get about 200 visitors daily for viewings or test rides. People are excited to see the SU7 because it’s rare in Zhanjiang—most units here are from out of town."

"But test drive requests are scarce—fewer than 10 a day. Most just look, take photos, and leave. Almost no one expresses interest in placing an order onsite, though we explain that purchases can be made directly via the app."

Unsurprisingly, the sales team noted that nearly all SU7 enthusiasts are young. Older demographics, however, remain indifferent: "They might not even recognize the Xiaomi brand, let alone care about its cars."

The pricing also baffles many: "When they hear our car costs over 200,000 RMB, older customers often scoff, asking, ‘Why not buy a Mercedes or BMW at that price?’"

For Xiaomi’s sales team, convincing third-tier city consumers that an "unheard-of" car justifies its premium tag remains an uphill battle.

Zeekr Sales: No Shortage of Concerns

Despite the bustling crowds at Xiaomi’s exhibition area, where sales staff remain relatively upbeat, the atmosphere at the Zeekr store directly opposite feels noticeably more subdued.

A family was browsing the Zeekr 7X when I arrived, but they left after a brief look, showing little interest.

After revealing my identity as a Zeekr owner, the salesperson admitted that "few customers in Zhanjiang recognize Zeekr."

"The brand is still unfamiliar to most here. Last time, a customer asked if we had a sedan with an electric rear wing. It turned out he was actually referring to the Lynk & Co Z10."

The Zeekr sales team explained that positioning Zeekr as a Geely subsidiary is their "last resort" to gain customer trust—ironically, some consumers haven’t even heard of Geely. Due to low brand recognition in Zhanjiang, few visit specifically for Zeekr; most drop in casually while shopping.

The most common concern? "Will Zeekr suddenly go out of business?"

"I don’t think it’s solely due to news about brands like WM Motor or HiPhi—they don’t follow those stories. It’s just that Zeekr feels too new, unlike Toyota or Honda, which naturally inspire confidence."

Beyond this, battery safety, electronic system stability, and build quality are recurring worries. The sales staff lamented that Zeekr’s online marketing efforts "haven’t reached Zhanjiang’s consumers at all."

"For any remotely interested client, we put in the work—but communication efforts are steep. We start with EV basics, then explain the brand, and finally discuss the product itself. It’s common to talk all day, only for them to walk away."

Zeekr isn’t alone in facing low recognition. Brands like Avatr and NIO have no official stores in Zhanjiang, while even established names like XPeng, Voyah, and Li Auto maintain just one outlet each across the city—or the entire Leizhou Peninsula.

In essence, the "challenges in selling new force vehicles" stem from multifaceted causes—encompassing both automakers’ sales process deficiencies and perceptual gaps among consumers. Tier-3 cities remain uncharted territory for new force brands.

The difficult but right thing

From the perspectives of local consumers and sales staff in Zhanjiang, selling vehicles from new automakers in third-tier cities is undeniably challenging. Yet, penetrating these markets—even fourth- to sixth-tier cities—has become a "difficult but necessary endeavor," driven by two key factors: market growth potential and brand infrastructure.

Market Growth Potential: Non-first/second-tier cities account for over 50% of China’s total auto sales, while EV penetration rates in third- to fifth-tier cities remain low—hinting at substantial growth opportunities.

Additionally, policies like "new energy vehicle (NEV) rural promotion campaigns" and national/local purchase subsidies ("guobu" and "dibu") are objectively boosting NEV appeal. These measures are steadily increasing the likelihood of lower-tier market consumers opting for EVs.

From a brand resilience perspective, drawing on the trajectory of China’s smartphone industry, lower-tier markets will grant new force brands stronger risk resilience—the so-called "deep roots" in the industry.

In Zhanjiang, older consumers’ loyalty to traditional ICE brands exemplifies this logic: lower-tier markets have slower information flow and less brand substitutability. Once user loyalty is established, it becomes more stable and enduring than in tier-1/2 cities.

Amid China’s hyper-competitive NEV market—with volatile tier-1/2 sales—lower-tier cities (tiers 3-4) could become "strategic backyards" for select new forces, providing stable sales bases and market confidence.

Yet, unlike China’s smartphone brands, many new force automakers approach lower-tier markets timidly. Standout exceptions include NIO (with its "Charging Every County" initiative) and Zeekr (integrating Lynk & Co’s lower-tier markets). Most new forces lag in dealership density, marketing materials, and proactive engagement—leaving them on the sidelines.

Zhanjiang, a relatively affluent southern city with EV-friendly infrastructure (charging, climate), is just a microcosm. In less developed tier-3-5 cities, challenges (e.g., charging gaps, brand unfamiliarity) are even steeper. Building "deep roots"—strengthening brand recognition—will remain a lengthy journey.

Which new force brand will successfully penetrate lower-tier markets (beyond BYD and traditional brands) and seize the initiative？