AutoBeta(AutoBeta.net)09/23 Report--

On September 23, the China Automobile Circulation Association (hereinafter referred to as "the Association") announced that it had recently received a large number of reports from dealers that the ongoing "price war" had left car dealers in a quagmire and faced with the outstanding problem of extremely tight liquidity.

To this end, the Association submitted to the relevant government departments an emergency report on the current financial difficulties and closure risks faced by car dealers. The "report" points out that at present, automobile dealers have suffered large losses in new car sales, and there are widespread cash flow deficit operations and increased risks of capital chain breakage, so it is difficult to get rid of the predicament of survival. The double pressure of sluggish consumption and wholesale volume of manufacturers has led to the high level of dealer inventory. In addition, the continuous "price war" also makes the purchase and sales upside down seriously, the more dealers sell, the more losses they lose. As of August, the upside-down sales data of dealers had reached-22.8%, an increase of 10.7% over the same period last year. The "price war" had led to a cumulative loss of 138 billion yuan in the new car market as a whole in the first eight months of this year.

To this end, the Association called on relevant government departments to pay close attention to the current financial difficulties and shutdown risks in the field of automobile distribution, and resolutely take phased financial relief policies and measures to effectively prevent the occurrence of systemic risks in the field of automobile distribution.

The "price war" in the automobile industry began in 2023 and has lasted for more than a year, and now it has become a "protracted war". Especially after entering 2024, the competition of domestic price war is very fierce, more and more car companies seize the market by way of price reduction, resulting in more and more fierce price competition among car enterprises, and the price of new energy vehicles falls again and again. On the other hand, behind the "price war", we hope to survive by reducing prices, so as to stimulate the desire of car consumption and achieve sales growth. However, the intensifying "price war" not only disrupts the original rhythm of the market, aggravates the wait-and-see mood of consumers, but also has a huge impact on the profits of car companies.

In July this year, the news that "BMW China will withdraw from the price war" attracted everyone's attention because the price war caused heavy losses in BMW stores. BMW hopes to focus on the quality of its business in the Chinese market in the second half of the year and support dealers steadily. Subsequently, including Volkswagen, Toyota, Honda, Volvo and other car companies have also said to withdraw from the price war, no further price cuts.

In addition to the level of car companies, the spread of the price war has also put the entire auto industry in trouble, especially dealers, profit margins have been further compressed, leading to a difficult life for most car dealers. Since the beginning of 2024, there have been frequent thunderstorms, financial crises, shop closures and delisting in large dealer groups in the industry. In July this year, Sinfeng Group Co., Ltd., the largest car dealer in Yancheng, Jiangsu Province, was reported to have suffered a major financial crisis; then in August, Guanghui Motor, one of the largest car dealer groups in China, went to delisting. Harmony Automobile, a dealer group specializing in luxury and ultra-luxury cars, also received a pay cut. At that time, Harmony Automobile responded: "the pay cut is a phased measure to actively adapt to the market environment to increase the ability to resist future risks." The company is confident that it will end this special phase as soon as possible through various measures. "

Not long ago, the first-half dealer data released by the China Automobile Circulation Association showed that only 28.8% of the dealers achieved their half-year sales targets in the first half of the year, while the percentage of dealers with a target completion rate of less than 70% still reached 33.3%. Among them, the luxury / import brand dealers achieved the target well, 44.8% of the dealers achieved the annual sales target, while the target completion rates of joint venture brands and independent brand dealers were 20.8% and 23.1%, respectively. In addition, large-scale losses are also the current situation of the development of dealers in the first half of the year. The overall loss area of dealers is at a high level in recent years. In the first half of the year, only 35.4% of dealers made profits, while the proportion of lossmaking dealers reached 50.8%, and the proportion of break-even dealers was 13.8%.

Nowadays, the automobile market is becoming more and more open, but the competition pattern in the industry is also further intensified, and the major car companies are fighting a price war to grab market share. As a result, the scale of new car sales and gross profit margin of some dealers have also declined. In this context, the government, associations and enterprises are also working hard to promote the recovery of the market, national tax cuts, local government subsidies, factory support and many other promotion fee measures to achieve a strong pull on the consumer side of demand and accelerate the recovery of the automobile market.

At present, the pessimism among dealers is spreading, and the above-mentioned association has previously said that it is more cautious about the expectation of the automobile market in the second half of the year and advises dealers to rationally estimate the actual market demand according to the actual situation. Some people in the industry said that traditional car dealers need to go from offline to online, omni-directional layout of sales channels, to find new opportunities for survival. "how to change" or "how to adapt to the changes of the times" is still a question worth thinking about by many car dealers.

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