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"I read in the news that some dealers lost hundreds of thousands of dollars on each car sold. Is that true?"

"How is that possible? The dealers made so much money. It's just that they are making less money now. It's not that scary..."

A few days ago, when friend A forwarded an article about the survival of dealers and raised the above question in the group chat, another friend immediately denied his point of view, saying that although car price cuts are common now, dealers have only made a little less money and have not yet suffered serious losses and found it difficult to survive.

After seeing their conversation, I gave my own answer: "The current situation of dealers is indeed quite dangerous."

This is not alarmist, but is supported by data. According to a report from the China Automobile Dealers Association, in the first half of this year, dealers' sales performance was very different. Only less than 20% of dealers completed their sales targets, and more than 80% of auto dealers failed to complete their targets. Among them, 13.5% of dealers even had a task completion rate of less than 50%.

Even though the situation has improved after a certain amount of consumption potential was released under the impetus of favorable policies such as the "old for new" policy, and even though many auto manufacturers have lowered sales targets for dealers in an effort to improve the health of their sales systems, the results of an auto dealer inventory survey released by the China Automobile Dealers Association showed that in July, the dealers' comprehensive inventory coefficient was 1.50, up 7.1% month-on-month and down 11.8% year-on-year, and inventory levels are still at the warning line.

Behind the eye-catching data, the survival of car dealers has already started to sound alarm bells.

A month ago, because Guanghui Auto's stock price fell below the one-yuan warning line for 20 consecutive days, the Shanghai Stock Exchange issued a prior notice to Guanghui Auto, announcing the delisting of Guanghui Auto's stocks and convertible bonds, shocking the industry.

At the same time, this also means that this leading Chinese auto dealer is on the verge of delisting.

As a leading domestic automobile dealer group, Guanghui Auto hasChase, GM and the Japanese "two Toyotas", to the acquisition of Baoxin Auto, Zunrong, Pengfeng and other peers, and then to the luxury brand, auto financing and used car market. With the large number of brands sold and the wide range of services involved, it has become the industry leader. At its peak, it had nearly 700 4S stores and a turnover of 170.4 billion yuan. Even in 2023, Guanghui Auto still maintains a revenue scale of 100 billion yuan and a net profit of 629 million yuan.

In May last year, the China Automobile Dealers Association released the "Top 100 Chinese Automobile Dealer Groups in 2023", which showed that among major dealer groups, Guanghui Auto ranked first in the industry in total passenger car sales and second in revenue scale.

However, such a dealer giant has suffered a net loss of 583 million to 699 million yuan in the first half of this year, and its market value before delisting has shrunk to 6.5 billion yuan - if it delists, Guanghui Auto will become the company with the highest market value in history when facing delisting.

In the view of industry insiders, Guanghui Auto’s experience not only marks a turning point in its own destiny, but also indicates that the prelude to the mass exodus of the auto dealer model is about to begin.

Yes, before Guanghui Auto suffered a setback, many 4S stores of Guangdong Yongao, Jiangsu Senfeng, Zhongtong Group, Li & Fung Auto, Chongqing Longhua, etc. had already been reported to have closed down, gone bankrupt, or delisted. The individual failures may be due to poor management, but the collective setbacks indicate the sluggish status of auto dealers.

Data shows that in the first half of the year, the profits of auto dealers showed a significant downward trend, with only 27.3% of auto dealers making profits. This figure was over 50% three years ago, and in 2023, the number of auto dealers that can make profits accounted for 37.6% of the total. It can be seen that the continuous losses have been like a haze hanging over the auto dealers, making them breathless.

The dust of history is like a mountain when it falls on everyone.

The collective frustration of car dealers is reflected in the lower-end 4S stores as endless losses and a collapse of mentality.

"In the first half of this year, our store has been losing an average of 1 million to 2 million yuan per month... I have never experienced such great pressure in my more than ten years in this business." This was what a salesperson said when a luxury brand dealer was recently interviewed by the media.

Admittedly, we currently do not have more specific and real data about the losses of 4S stores, but this does not mean that the dealers are lying, because there are many similar statements made by dealers. For example, the media has previously reported that a dealer of a mainstream luxury brand located in Chaoyang, Beijing, lost more than 1 million yuan in selling cars in June.

Look! Even if you are a luxury brand, you have become a “fish in the pond” that is affected by the “fire in the city gate” market. So, we saw the news that “a certain brand 4S store lost more than 100,000 yuan by selling a car” in the article forwarded by a friend at the beginning.

The huge losses caused dealers' emotions to start getting out of control.

In the first half of the year, there have been reports of several car dealers “rebelling”.PorscheDealers "forced the German headquarters" due to inventory pressure.Beijing HyundaiDealers jointly requested a suspension of car pick-ups. This "even-handed" loss is like a sword of Damocles hanging over the heads of car dealers. Even if you are a luxury brand, you cannot escape this catastrophe.

At present, pessimism among auto dealers is still spreading. They are cautious about the outlook for the auto market in the second half of the year, believing that the overall auto market will maintain last year's level and terminal sales will face downward pressure.

Since the mask incident in 2020, the car dealer model has been challenged.

Between 2020 and 2022, the number of domestic 4S stores that withdrew from the network was 2,362, 1,400 and 1,757 respectively. By 2023, this number climbed to 2,540, a record high. It is foreseeable that as more and more dealer groups go bankrupt in the future, the number of 4S stores that withdraw from the network is expected to increase further.

This can't help but raise the question: Since the emergence of the dealer model, this model that establishes a close relationship between manufacturers and dealers has quickly become a mature automobile sales model, but after so many years, why is it suddenly so difficult now?

Taking Guanghui Auto as an example, the explanation for the loss in its financial report is: industry competition has intensified, and automakers have launched price wars to grab market share, causing the company's new car sales volume and gross profit margin to decline compared with the same period last year.

Of course, the first thing that comes to mind is the inability to sell cars. After all, as a commodity, automobile products are the direct cause of maintaining a balanced and healthy ecological chain between automobile manufacturers and dealers.

Those models with high per-vehicle profits and strong brand premium capabilities are mostly luxury brands. They are not only the favorites of consumers, but also the sweet cakes of dealers. They determine the dealers' ability to make money. Those models with low per-vehicle profits but able to sell in large quantities are also popular with dealers. The main strategy is "small profits but quick turnover", so that quantitative changes can lead to qualitative changes.

However, when the sales scale of automobile products fails to increase, the automobile dealer model will face challenges.

"The inventory is increasing, and the pressure is huge. The price is already very low, and if we discount it further, we will lose all our underwear."

“Usually there are very few people coming to see the car, and there are no new products.”

When Auto Commune interviewed sales staff of a mainstream brand and a second-tier brand, they received the above responses. In the eyes of sales, they all have their own difficulties. When the product is blocked at the sales end, coupled with the cost pressure of labor, water, electricity and rent, the 4S store is bound to lose money. In this case, the more luxurious the brand, the higher the cost, making it difficult for dealers to maintain business order for a long time.

The problem of not making money from selling cars also troubles dealers.

The current price war in the auto market is getting more and more intense. Due to the current increase in terminal discounts, some dealers have already experienced a situation where "the more they sell, the more they lose money". Therefore, we have seen the salesperson mentioned in the previous article that "they lose more than 100,000 yuan for selling a car". Faced with the current situation of losing more and more money, many dealers are even unwilling to sell cars.

However, most dealers still try to sell as many cars as possible, because their inventory pressure is also difficult to solve. Selling cars can not only recover some funds, but also get corresponding rebates while completing the OEM's assessment, thereby minimizing operating losses as much as possible.

At the same time, manufacturers of some brands have also begun to take measures to reduce the pressure on dealers. The most controversial one is the news that BBA will withdraw from the price war one after another in July and adjust prices.

When the market was still joking that BBA's move was nothing more than "making 10,000 yuan from 10 people each" and turned into "making 100,000 yuan from one person", the inventory of vehicles in many stores of these brands has become controllable compared with before. It can be seen that some strong brands can still effectively alleviate the operating pressure of dealers after taking measures.

In addition, some industry insiders believe that the increasing survival pressure of traditional auto dealers is the result of market changes. As China's auto market advances by leaps and bounds in the new energy track,TeslaFrom "NIO, Xpeng and Li Auto" to other new energy brands that have established direct sales models, self-operated stores have begun to impact the traditional dealer model.

Because the heavy asset model brings inventory and capital pressure to dealers, especially when the market is down, the dealers' capital chain will be tested, and even the capital chain will be broken if they are not careful. Then, it will bring a series of problems including inventory vehicle disposal, OEM rebates, customer rights, employee layoffs, etc., which will cause heavy damage to the ecological chain of dealers and even the traditional sales model.

In contrast, directly-operated stores adopt an order-based model, which eliminates inventory pressure and has low overall costs, becoming a new option for market development.

In short, whether they are victims of price wars, the choice of brand survival of the fittest, or the result of the changing times, dealers are facing unprecedented challenges. Looking at Guanghui Auto, which is about to fall, no one can guarantee where their next step will be. The only thing dealers can do now is to follow the market trend and work with the brand to continue to save themselves.