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"In the first half of this year, our store lost an average of 1 million to 2 million yuan per month. The situation has improved since July. I have been in the industry for more than ten years and have never experienced such great pressure."A few days ago, a staff member of a luxury brand car dealer told the reporter of "Daily Economic News" helplessly.

The latest survey results of "Auto Dealer Inventory" in July 2024 released by the China Automobile Dealers Association recently showed that in July, the comprehensive inventory coefficient of auto dealers was 1.50, a month-on-month increase of 7.1% and a year-on-year decrease of 11.8%. The inventory level is at the warning line.In July, the inventory coefficient of 6 automobile brands exceeded 2 months.

In fact, under the "price war", dealers' operating conditions are not as good as expected, new car profit margins are compressed, inventory backlogs and weak market demand have become common problems in the current industry. "Inventory pressure", "cash flow crisis" and "selling cars at a loss"... These pressures have become the biggest troubles for domestic auto dealers this year.

Many brand dealers are in a survival dilemma

"The more they sell, the more they lose. Some dealers even choose not to sell cars (at a loss), but most dealers still try their best to follow the 'price war' to sell cars. After all, selling at a loss is better than having inventory sitting on the table. On the one hand, they can recoup some funds, and on the other hand, they can meet the OEM's assessment targets and get some rebates." A car salesperson from a domestic brand told reporters.

A staff member of a joint venture brand revealed to reporters that compared with previous years, the number of stores that have withdrawn from the network due to active or passive reasons has indeed increased since this year.

Recently, a letter from Hunan Province dealers to Beijing Hyundai circulated on the Internet. Nine car dealers stated in the letter:"In view of the huge inventory pressure, extremely difficult operation and serious losses of all dealers in Hunan Province, all dealers in Hunan Province unanimously request that they temporarily stop picking up vehicles from your company from August 8, 2024, and no longer accept vehicles automatically delivered by your company. Otherwise, all consequences will be borne by your company. Your company shall immediately solve the existing inventory of dealers in the Hunan region and honor all previous commitments and incentive policies."

In fact, this year, from the beginning of the year when Guangdong Yongao Investment Group Co., Ltd. was exposed to the closure of many of its 4S stores, to the financial crisis of Jiangsu Senfeng Group Co., Ltd., a large regional automobile dealer, in July this year,Car dealers are under tremendous pressure to survive.

According to the data from the China Automobile Dealers Association, it is estimated that in July, the domestic passenger car terminal sales volume was about 1.75 million units, and the total inventory of automobile dealers at the end of July was about 2.6 million units, and the total channel inventory increased. In terms of brands, the inventory coefficient of high-end luxury and imported brands was 1.38, up 34.0% month-on-month; the inventory coefficient of joint venture brands was 1.63, up 14.8% month-on-month; the inventory coefficient of independent brands was 1.47, down 3.9% month-on-month.

Since the dealer model is an asset-heavy model, once problems arise with the dealer, the so-called "gray rhino" effect will occur, bringing about a series of practical problems such as inventory vehicle and after-sales spare parts processing, OEM rebates, customer rights, and employee layoffs.

This year, the All-China Federation of Industry and Commerce Automobile Dealers Chamber of Commerce made an appeal on behalf of the majority of dealers, suggesting that the competent authorities attach great importance to the construction of the business environment and healthy and sustainable development of the automobile distribution industry, and that automobile manufacturers pay close attention to the survival of dealers and establish a fair, transparent, simple and efficient dealer withdrawal mechanism.

Manufacturers have begun to relieve pressure on dealers

“Dealers are very important assets for OEMs and are the key to whether they can sell good cars.It is a fact that the situation of the entire joint venture brand dealers is not optimistic.For car companies, the first step in corporate adjustment is to solve the survival problem of the channel. We are helping them to clear inventory, reduce the pressure on dealers, stabilize the dealer system, and enhance their vitality and confidence. "A staff member of a joint venture brand told reporters.

In fact, some brands have already started to take action. For example, in July this year, BMW dealers adjusted prices. At that time, a salesperson from a BMW 4S store explained to reporters that after June this year, when dealers nationwide held a meeting to review the situation, they found that the business conditions of each store were not optimistic. Therefore, the OEM lowered the wholesale sales tasks of each store to ease the dealers' business conditions and ensure market share and service standards.

The staff of the above-mentioned luxury brand car dealer also showed the reporter the store's vehicle inventory table and said that compared with before, both the vehicles in the store and the vehicles on the way are now in a relatively controllable state.

"We are not only clearing dealers' inventories to make their operations healthier, but we are also sorting out channels. For example, in some areas, car dealers have too many stores, and some may be closed. On the contrary, the potential of some second-tier dealers can be further explored, or some stores can be upgraded to make the channel layout more reasonable." said the above-mentioned joint venture brand staff.

In addition, the analysis of the China Automobile Dealers Association shows that the pressure on auto dealers may be partially relieved in August. "Although most auto companies have taken holidays due to the high temperature and the production volume has decreased, the sales end is catalyzed by the strengthening of the old-for-new policy and the demand for cars during the school season, and the peak season of the auto market is expected to be advanced. The support funds for the old-for-new car exchange are gradually in place, and the local superimposed subsidy policies have been clarified. In addition, the cooling of the property market and the interest rate cuts have released certain consumption potential, and many new cars have been launched in the market. The auto market in August will be better than expected." The China Automobile Dealers Association believes.

The China Automobile Dealers Association also suggested that as the uncertainty in the automobile market increases in the future, dealers should rationally estimate actual market demand based on actual conditions, put cost reduction and efficiency improvement first, and guard against operational risks.

reporter|Huang Xinxu

edit|Cheng Peng Pei Jianru Gai Yuanyuan

Proofreading|Zhao Qing

Cover image source: Photographed by reporter Zhang Jian of Meijing (file photo)

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