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Blue Whale News, August 26 (Reporter Li Zhuoling)As the new car price war intensifies, luxury car dealer groups can no longer bear it.

Recently, Harmony Auto was exposed to have all its employees cut their salaries. According to a "Letter to All Employees of Harmony Auto" circulated online, Harmony Auto is facing unprecedented operational pressure. At this critical moment, the company decided to take emergency measures to cut the salaries of all employees at the headquarters and its subsidiaries from August to December 2024.

The reduction standards are divided into four parts: among them, the chairman and vice chairman will have a 50% salary cut; senior management, including the president and vice president, will have a 35% salary cut; middle management, including directors, headquarters managers and general managers, deputy general managers, and operations managers of each subsidiary will have a 25% salary cut; and other employees will have a 15% salary cut.

"Harmony Auto is not just a business, it is also the cornerstone for protecting 4,000 employees and their families." The letter stated that once the group's operating conditions improve and it turns losses into profits ahead of schedule, the original salary standards will be restored immediately.

Screenshot of the online publication "A letter to all employees of Harmony Auto"

In response to the online rumor, Harmony Auto gave an exclusive response to Blue Whale News on August 26, saying that Harmony Auto's operations are currently normal. "The salary cut for all employees is a phased measure for us to actively adapt to the market environment and increase our ability to resist future risks. The company is confident that through various measures, this special stage will end as soon as possible."

According to the official website of Harmony Auto, the company focuses on the sales of luxury and super luxury cars and develops a comprehensive service industry for new energy vehicles. As of December 31, 2023, Harmony Auto has 80 authorized dealer outlets worldwide, including 14 luxury and super luxury brands in mainland China, with a service network covering 40 cities in 17 provinces. Harmony Auto has been listed many times in the "Top 100 Chinese Auto Dealer Groups" published annually by the China Automobile Dealers Association.

According to the 2023 financial report of Harmony Auto, a Hong Kong-listed company, the company achieved total sales of 38,475 units in 2023, an increase of 8.4% year-on-year, of which 38,475 units were delivered in 2023.BMW(IncludingMINI) 28,465 units, up 6.4% year-on-year, deliveredLexus4,266 units, a year-on-year increase of 10.1%.

Despite the increase in sales, it is in a loss-making state. According to the financial report, Harmony Auto's revenue in 2023 was 16.58 billion yuan (the same below), a year-on-year increase of 1.6%; but its loss for the year was 242 million yuan. The group's gross profit margin in 2023 was 5.8%, a year-on-year decrease of 0.8%, which the official said was mainly due to the decline in new car prices.

Behind the salary cuts of all employees at Harmony Auto, most auto dealers are having a hard time. Recently, Guanghui Auto, the largest auto dealer group in China, went bankrupt. Its BMWBenzIt was revealed that it was difficult to pick up cars at many 4S stores.

According to the results of the national automobile dealer survival status survey in the first half of 2024 recently released by the China Automobile Dealers Association, the proportion of dealers suffering losses in the first half of 2024 reached 50.8%, and the proportion of profitable dealers was 35.4%. The loss area has significantly expanded compared with the previous year.

"Since the second quarter, the price war has intensified, manufacturers and dealers are stuck in the price quagmire, and profits are swallowed up by the endless price war. New car sales have suffered serious losses, dealers are operating at a negative flow (deficit), and operating risks have increased. The loss area has widened and the profit area has narrowed. The survey shows that even for profitable dealers, the profit of a single store has dropped significantly year-on-year." said the China Automobile Dealers Association.

It is worth noting that some car companies have withdrawn from the price war. In July this year, there was news that BMW China decided to stop the "price reduction to maintain market share" measure that lasted for nearly a year. In this regard, an insider of BMW China told Blue Whale News at that time, "BMW will reduce sales from July to ease the operating pressure of stores. BMW intends to help dealers cope with short-term market challenges and relieve business pressure." Under the leadership of BMW, Mercedes-Benz,AudiAbout 10 brands, etc. were exposed to gradually reduce their preferential levels or benefits.

As the price war in the auto market has come to a halt, Blue Whale News will continue to pay attention to how dealers' subsequent operations will develop.