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Recently, a letter from a dealer in Hunan Province to Beijing Hyundai has been circulated online.

The content of the letter stated that in view of the huge inventory pressure, extremely difficult operations and very serious losses of all dealers in Hunan Province, all dealers in Hunan unanimously requested that they temporarily stop picking up cars from Beijing Hyundai from August 8, 2024, and no longer accept automatically delivered vehicles.

At the same time, dealers asked Beijing Hyundai to immediately solve the existing inventory of dealers in Hunan and honor all previous promises and incentive policies. In the picture circulated online, nine dealers in Hunan Province jointly stamped their seals.

Based on this, the reporter of International Financial News verified with the dealers mentioned in the letter, and the authenticity of the letter was confirmed by some dealers. The reporter then verified with Beijing Hyundai, and the relevant staff said that they needed to confirm with their superiors.

Judging from the content of the letter, this "forcing of the palace" is related to the high inventory and great sales pressure in the hands of dealers.

The reporter learned that there are currently 13 Beijing Hyundai dealers in Hunan Province, and the number of dealers participating in the "forcing the palace" this time is nearly 70%, and their registered capital is all over 5 million yuan. Most of the dealership addresses are located in Changsha, Yiyang, Yueyang and other places, covering most of the important cities in Hunan.

The reason for this joint "forced palace" is that sales have declined. The monthly sales volume of the stores is in conflict with the company's vehicle delivery task, resulting in an increase in inventory, increased sales pressure, and problems with the capital flow of suppliers.

Data from the China Automobile Dealers Association showed that the inventory coefficient of automobile dealers was 1.5% in July. A total of six brands had an inventory coefficient of more than 2%. Beijing Hyundai ranked second at 2.45%.

According to media reports, among the dealers who jointly "forced the palace", one store only sold about 10 cars a month, while Beijing Hyundai set a monthly delivery task of about 10 to 30 cars for dealers, and they had to complete the delivery task every month to get the terminal reward. Industry insiders believe that this bundling operation has put dealers in a dilemma of increasing inventory and narrowing profit margins.

The dealers with the largest backlog of inventory in Hunan Province probably have more than 100 vehicles in stock, but their monthly sales are only maintained at around 10 vehicles, and the inventory pressure has increased dramatically.

The increase in inventory has caused difficulties in the circulation of funds for dealers, which is related to the cooperation model between Beijing Hyundai and dealers.

Nowadays, there are various cooperation models for dealers. Some car companies agree that dealers will not pay for vehicles for the time being and only serve as sales channels. The manufacturer will send the car after the customer places an order at the store. However, Beijing Hyundai's dealers need to pay for the vehicles to the car companies in advance to ensure that there are cars available for sale. Based on this calculation, one hundred inventory cars will probably result in a capital backlog of eight to nine million yuan.

In order to quickly sell the inventory and realize capital recovery, dealers have to choose to sell at a loss. Currently, the average loss for each car sold is between 5,000 yuan and 15,000 yuan, which has almost become the norm for Beijing Hyundai dealers. Since the price reduction varies from store to store, consumers can "shop around", which leads to unhealthy competition among dealers within a single brand.

Some dealers complained that Beijing Hyundai's control over cross-regional sales chaos and market prices was insufficient. Currently, the prices of Hyundai cars in the market are in a relatively chaotic state. Although they have reported the relevant issues to the manufacturer before, they have never been properly resolved.

The dealers' "forcing the palace" has once again drawn the market's attention to Beijing Hyundai. As a company that once had sales of over one million vehicles for four consecutive years, its monthly sales have now fallen to only 10,000 vehicles.

As new energy vehicles become increasingly popular and domestically produced cars rise, the market share of joint venture cars is gradually being taken over. Beijing Hyundai's sales are declining due to its slow pace of model updates and inability to adapt to market changes in a timely manner.

In 2016, Beijing Hyundai reached a peak sales volume of 1.14 million vehicles; in 2017, sales fell to 820,000 vehicles, and the record of breaking one million vehicles came to an end; from 2018 to 2020, Beijing Hyundai's sales were 766,000 vehicles, 716,000 vehicles and 502,000 vehicles, respectively, with corresponding declines of 6.59%, 6.53% and 29.89% respectively; in 2022, the company's sales volume was less than 300,000 vehicles, and last year it fell to 236,000 vehicles. Compared with 7 years ago, sales have shrunk by nearly 80%.

The situation this year is even less optimistic.

Data from Pacific Automotive shows that since February this year, Beijing Hyundai's sales have declined year-on-year for five consecutive months. In the first seven months, the company's retail volumes were 22,500, 12,000, 17,000, 14,300, 16,000, 12,500 and 10,000 respectively, with cumulative sales of only about 104,300 vehicles.

If there is not much growth in the second half of the year, Beijing Hyundai's annual sales may fall below 200,000 vehicles this year.

Looking at the Hunan market alone, half of the top ten passenger car sales in Hunan in the first half of the year were from joint venture brands.Dongfeng NissanItsSylphy, with cumulative sales reaching 10,200 units in the first half of the year, ranking fourthGAC Toyota Highlander, 6thSAIC Volkswagen Lavida, 8thGAC Toyota Wildlanderand the tenthGAC Honda AccordThese models are deeply loved by Hunan consumers because of their high cost-effectiveness.

It is not difficult to see from this set of data that consumers in Hunan Province do not dislike joint venture cars, but they are not very interested in Beijing Hyundai.

This may be related to the reduction of the domestic special edition of Beijing Hyundai. Previously, a blogger revealed that the seventh generation of Beijing HyundaiElantraFor example, the Chinese version of Elantra has lower configuration than the Korean version of the same model, and has at least 25 reductions.

The most important thing is that the safety of some models of Beijing Hyundai is questionable.SonataIn the US NHTSA safety test, the frontal collision, side collision and rollover tests all received full marks, but in the 40% offset collision test conducted by China Automotive Research Institute, the A-pillar was significantly deformed; in addition,FestaIn the C-NCAP collision test, the A-pillar was crushed into a triangle on the spot, which gave the Fiesta the worst P grade for its crash resistance and repair economy.

In fact, this is not the first time this year that dealers have joined forces to "force out" manufacturers.

Appeared in MayPorscheThe reason for the dealers' "forcing the emperor to abdicate" is basically the same as this time. They are all affected by the decline in sales and can no longer sell the cars in their hands.

In the current era of the prevalence of new energy and the rise of domestic brands, the market share of joint venture cars is gradually being squeezed. In July this year, the domestic new energy passenger car market retail sales volume was 878,000 units, a year-on-year increase of 36.9%. The penetration rate reached 51.1%, an increase of 15 percentage points from the same period last year. The monthly retail penetration rate exceeded 50% for the first time.

As the penetration rate of fuel vehicles gradually decreases, joint venture automakers may still be "forced out" by dealers. How to handle the relationship with dealers and boost sales has become a major challenge for joint venture automakers.