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Old 10-15-2019, 09:30 AM   #1
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Join Date: Nov 2004
Default China's dealerships devastated

SHANGHAI We knew China had been in a prolonged auto sales slump, and we knew the market was under pressure from tougher municipal and provincial emissions standards.

Now, we're seeing how these factors are devastating dealerships, to the tune of half of them being sold and several hundred being driven out of business.

A survey led by Renhedao, a Beijing consultancy on dealership management, offers a rare glimpse into the tough world of most car dealerships in China. Renhedao conducted the survey with Far Eastern Horizon, a Hong Kong finance and leasing company, and Beijing magazine Auto Business Review.

While the information can't be verified by the China Automobile Dealers Association, a government-affiliated trade group, it paints another picture of the challenges facing the country's once-hot market, one still saddled with too many brands and plants.

The survey covered dealerships under 82 brands in 320 cities. Among the country's 31,000-plus dealerships, 44 percent suffered losses, just 29 percent were profitable, and the rest broke even in the first half of this year, according to the survey.

The survey also shows that the lower a brand is positioned in the market, the harder its dealerships have been hit financially.

Luxury is the only segment that has continued to grow, so luxury dealerships have held up relatively well.

In the first six months, 43 percent of stores marketing luxury brands were profitable, a drop of 2 percentage points from the same period last year. On the other hand, the share of luxury dealerships that racked up losses also dipped 2 points, to 30 percent.

The picture is different for foreign mass-market brands. In the first half, the share of their dealerships that still generated profits decreased 4 percentage points to 29 percent, while stores that reported losses rose 2 points to 43 percent.

The hardest-hit dealers represent domestic Chinese brands, most of which target the low end of the market. Just 20 percent of these dealerships still made money, 2 percentage points lower than a year earlier. Meanwhile, the proportion of unprofitable stores jumped a whopping 10 points to 59 percent.

The survey also reveals that some 15,300 dealerships changed hands and more than 500 closed in the first six months.

China's new-vehicle market has been shrinking since July 2018. Last year, annual new-car deliveries declined for the first time in nearly three decades.

In addition to the extended downturn, stricter emissions rules have hurt the profit margins on new-car sales, Renhedao pointed out in the report.

As of July 1, 16 of China's 31 provinces and provincial-level municipalities, such as Shanghai and Beijing, had tightened vehicle emissions standards ahead of schedule.

The move forced a large number of dealerships to offer steep discounts in May and June on vehicle inventory that fell short of the stricter rules.

Sales are on track to decline for the second-straight year. And pressured by an environmental protection campaign Beijing launched last year, more provinces are likely to embrace the tougher emissions rules.

Dealership consolidation is expected to continue, according to Renhedao. The consultant predicts that more than two-thirds of Chinese brands will be forced to exit the market.

It also believes a few luxury marques and several mass-market global brands will be further marginalized. Infiniti might be one, as more than 40 percent of its dealerships reported losses in the first half. Three French brands Peugeot, Citroen and Renault also appear vulnerable, with more than 70 percent of their stores in the red in the first half.

For dealerships under these and other brands, it will be a bumpy road for a while.

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Old 10-15-2019, 11:34 AM   #2
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China kinda market very unusual. China only knew growth for 50 years so much like Japan hitting 90s slowdown will have trouble realizing what is now a global slowdown of the many buyers of China merchandise.There are almost 100 Chinese EV makers and and as many domestic auto makers and imports. I attend some of the Chinese trade shows and more motorcycle makers than you can count. VW, Audi and BMW were the early makers in China and Chrysler tried and failed with Beijing Jeep.Most are heavily invested by Govt A major consolidation will take place in all Chinese manufacturers but will rebound in future with more profits to those who stay alive. Chinese love American pickups, motorcycles but they are taxed heavily but you see some Ford Raptors and they taxed 200%.
Debt bubbles starting to sizzle everywhere
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Old 10-16-2019, 01:48 PM   #3
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