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The auto market has undergone tremendous changes, which have affected not only automakers themselves but also dealers. First, the domestic auto dealer giant Guanghui Auto failed to maintain its listing status; thenPorscheDealers are collectively "forcing the German headquarters to abdicate", and a cold winter is sweeping across domestic auto dealers.

Recently, a joint letter from nine auto dealers was circulated online.Beijing HyundaiThe letter pointed out that due to serious inventory backlogs, operating difficulties and increasing losses, all Beijing Hyundai dealers in Hunan Province unanimously requested to temporarily stop picking up cars from Beijing Hyundai from August 8, 2024, and refused to accept its automatically delivered vehicles. At the same time, dealers asked Beijing Hyundai to immediately solve the existing inventory problem and honor its previous commitments and incentive policies.

As public opinion ferments, the official has not yet given a positive response. Behind the frictions between dealers and car companies, there are not only the real difficulties faced by joint venture car companies represented by Beijing Hyundai in the current Chinese car market, but also reflect that domestic dealers have not ushered in the "good days" they expected in the post-epidemic era.

Only 27.3% of dealers were profitable in the first half of the year

The data gives the most intuitive expression of how difficult life is for domestic auto dealers these days.

Not long ago, the China Automobile Dealers Association released the "Auto Dealer Investor Survey Report", which showed that in the first half of 2024, dealers' overall profits showed a significant downward trend, with only 27.3% of auto dealers making profits. Compared with the 37.6% profit ratio of dealers in 2023, the loss area has expanded significantly.

The latest issue of the "China Auto Dealer Inventory Warning Index Survey" VIA released by the China Automobile Dealers Association shows that the China Auto Dealer Inventory Warning Index was 59.4% in July 2024, up 1.6 percentage points year-on-year and down 2.9 percentage points month-on-month. The inventory warning index is above the boom-bust line, and the automobile distribution industry is in a recession.

Under heavy pressure, dealers have indeed been walking on thin ice in the auto market in recent years. In February 2023, Zhejiang Taizhou's largest auto dealer "Zhejiang Zhongtong Holding Group" ran away due to a broken capital chain; in April of the same year, stores under Chongqing Longhua Industrial Group were either closed or transferred; in January this year, Guangdong auto dealer Yongao Investment Group Co., Ltd. went bankrupt, and many of its 4S stores have been closed...

Statistics show that in the past four years, more than 8,000 4S stores have closed down, and in 2023 alone, the loss rate of automobile dealers reached as high as 43.5%.

Looking back at Guanghui Auto’s “locked delisting” incident, if such a dealer giant is having such a hard time, one can imagine how difficult it is for other dealers.

For dealers, there are many factors that have led to their current situation, including their own poor management, inventory backlogs that have put pressure on profits, and the proliferation of direct sales models... However, most dealers have pointed the finger at the price war in the auto market in their financial reports.

In order to gain more market share, car companies have repeatedly shouted the slogan of "price reduction", lowered the pricing of new cars, and introduced the same price for oil and electricity. The traditional joint venture fuel vehicle pricing system, which has always been stable, has also begun to collapse, and even luxury brands are unable to maintain their premium ability.

Under the strategy of car companies to maintain volume by price, terminal transaction prices in the automobile dealership market have fallen, sales gross margins at the dealership end have narrowed, and profitability has declined. This has led to problems such as falling prices of new cars, heavy inventory pressure, tight funds, and low profits per vehicle.

Car manufacturers are raising prices high, and dealers have no choice but to move forward under the heavy burden.

Dealers survive in the cracks

The price war has certainly taught domestic auto dealers a lesson, but the pain of industry transformation is unavoidable. It is precisely every transformation, under the new market screening mechanism, that can ultimately renew the industry.

In order to survive, some dealers have begun to actively embrace new energy. For example, Shanghai Yongda Automobile Group sold a total of 32,919 new energy vehicles in 2023, a year-on-year increase of 33.8%, accounting for 17.0% of the overall sales.

Driven by the sales of new energy vehicles, the dealer's independent new energy brand after-sales business has also steadily increased, with annual maintenance revenue reaching 159 million yuan, a year-on-year increase of 255.3%.

At the same time, as rounds of price wars unfold, automakers are forced to tighten their belts and squeeze out room for price cuts by cutting costs.TeslaThe direct sales model that was first promoted seems to be undergoing a decline.

You should know that in 2013, Tesla opened the first Tesla Experience Center in China at Beijing Parkview Green, providing a new sales channel model for the Chinese auto market - direct sales. It also led to a large number of domestic followers, with new car-making forces represented by Wei, Xiaopeng and Li Auto being the most common.

However, this direct sales model is a double-edged sword. On the one hand, it can bring advantages to automakers such as brand control, profit maximization and customer experience; but on the other hand, it also has challenges such as high costs, operational risks and management difficulties.

Industry insiders pointed out that the average annual cost of operating a direct-operated store in China is 4 million yuan. Based on this calculation, if one direct-operated store is opened in each of the 250 key cities, the annual operating cost will be as high as 1 billion yuan.

For those car companies that are still on the verge of survival, the direct sales model has become a shackle and reform is imminent.

Especially under the threat of reality, car companies that have always been mainly based on the direct sales model have to compromise, comprehensively launch channel reforms, and embrace the "direct sales + dealer" dual model.

Tengshi andEquation LeopardThe brand has officially announced that it will fully open up dealer recruitment and franchise, continuously extending and expanding the channel model;NIOThe sub-brand Ledao will not follow the direct sales model of the main brand, but will introduce dealers to set up independent stores;XiaopengWe chose to continue to stabilize dealers, take the initiative to reduce pressure, and make sure that dealers can achieve their goals, get rebates, and maintain reasonable profits for the latter...

The reform of the channel model also provides more opportunities for dealers to turn to new energy.