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The reality that half of the country's auto dealers were in a loss-making state in the first half of the year means that even those focusing on the more stable ultra-luxury market are not immune to the impact.

Recently, Harmony Auto, a leading domestic luxury and super luxury car brand dealer, was reported to have cut salaries for all its employees. 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 salaries for all employees at the headquarters and its subsidiaries from August to December 2024.

The reduction standard is divided into four parts:The chairman and vice chairman will have their salaries cut by 50%; senior management, including the president and vice president, will have their salaries cut by 35%.; Middle management, including directors, headquarters managers, and general managers, deputy general managers, and operations managers of each subsidiary, will have their salaries cut by 25%;Other employees will receive 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"

According to Blue Whale Finance, on the 26th,Harmony CarIn response,Harmony Auto's operations are currently operating normally. "The salary cut for all employees is a phased measure for us to actively adapt to the market environment., in order to increase the ability to resist future risks. The company is confident that through various measures, this special stage will be ended as soon as possible. "

According to the official website of Harmony Auto, the company is a comprehensive automotive service company specializing in luxury and super luxury car brands. It was listed on the main board of Hong Kong in 2013. 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.Rolls-Royce, Bentley, Ferrari, Maserati, Lamborghini, five super luxury brands and BMW, MINI, Audi, Volvo, Land Rover, Lexus, Jaguar, Lincoln, Alfa Romeo, nine luxury brands。

The financial report shows that Harmony Auto's revenue in 2023 will be RMB 16.58 billion (the same below), a year-on-year increase of 1.6%, but its loss for the year will be RMB 242 million. The group's gross profit margin in 2023 will be 5.8%, a year-on-year decrease of 0.8%, which the official said was mainly due to the decline in new car prices.

As of press time, Harmony Auto's share price was HK$0.39, with a total market value of HK$595 million.

In the Chinese market, luxury car dealers are generally facing sales difficulties.In May this year, almostallSales of super luxury car brands in the Chinese market have experienced double-digit year-on-year declines, with severely affected brands such as McLaren seeing sales drop by as much as 90%.

Data from the China Automobile Dealers Association showed that in 2023, dealers' gross profit margin for new cars dropped sharply to -15.6% from 19.7% in the previous year.

Harmony Auto's decision to cut salaries for all employees undoubtedly reflects the severe situation currently faced by the entire automotive industry. In recent years, domestic auto dealers have generally faced tremendous pressure. On the one hand, the excessively high annual sales targets of manufacturers have led to an imbalance in market supply and demand, frequent fluctuations in new car prices, and strong wait-and-see sentiment among consumers; on the other hand, the rapid growth of the new energy vehicle market has further squeezed the space in the traditional fuel vehicle market, and some dealers are facing multiple difficulties such as declining product competitiveness and rising operating costs.

According to the Beijing News, the latest data released by the China Automobile Dealers Association shows that the survival situation of automobile dealers across the country in the first half of 2024 is not optimistic. Only 28.8% of dealers have achieved their semi-annual sales targets, and dealers with a target completion rate of less than 70% account for as high as 33.3%. Although luxury/imported brand dealers performed relatively well, the target completion rates of joint venture brands and independent brand dealers were only 20.8% and 23.1%, respectively.

In terms of business performance, in the first half of the year,LossDealers accounted for 50.8%, with 35.4% making profits, and the loss-making area increased significantly compared with the previous year; the average gross profit of dealers per store was significantly reduced compared with 2023. The average loss per store reached 1.78 million yuan, and the loss continued to expand. Among them, the loss of new car business was particularly serious, with a negative gross profit contribution.

Recently, many automobile dealers such as Guangdong Yongao and Jiangsu Senfeng have announced their closure or delisting. Among them, Guanghui Auto, once the largest automobile dealer in the country, has now confirmed that it will be delisted at the end of this month.

Since the beginning of this year, the "price war" in the automobile market has intensified, and almost every brand has been caught in this vortex.As the "war" continues to escalate, more and more automakers are calling for the shift from "price war" to "value war". Some have adopted the strategy of "controlling quantity and stabilizing prices", while others have expressed their intention to follow up with "repairing the value system".

Previously, 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.Led by BMW, about 10 brands including Mercedes-Benz and Audi were exposed to gradually reduce their preferential treatment or rights.

edit|Sun Zhicheng Du Hengfeng

Proofreading|Duan Lian

Cover photo taken by reporter Kong Zesi of Meijing (photo and text are unrelated)

Daily Economic News integrates 21st Century Business Herald, Blue Whale Finance, China Economic Net, Beijing News, etc.

Daily Economic News