Only 2 out of nearly a hundred car brands are profitable, Chinese dealers urge the government to solve the problem

Recently, the China Automobile Dealers Association has received a large number of reflections from member enterprises. The drastic changes in the auto market brought about by ongoing "price wars" and other factors have put auto dealers in deep trouble, facing the prominent issue of extremely tight liquidity. The Association immediately carried out extensive research and analysis to reflect as fully as possible the current liquidity predicament and shutdown risk faced by auto dealers.

Recently, the Association has formally submitted to the relevant government departments the "Emergency Report on the Current Liquidity Difficulties and Shutdown Risk Faced by Auto Dealers" (hereinafter referred to as the "Report"), which analyzes the issue of tightened liquidity chain faced by auto dealers and the increased risk of shutdown, and proposes relevant policy suggestions. This timely reflects the real problems faced by auto dealers and provides an effective basis for government decision-making.

1. Intensified liquidity difficulties, unsustainable operation

According to the Association's research, dealers are generally facing the problem of high inventory and inverted purchases and sales. To alleviate the pressure of funds and financing costs, dealers have to sell new cars at a lower price, but this has intensified losses. Data shows that in August of this year, the figure for inverted purchases and sales in the new car market was as high as -22.8%, 10.7 percentage points higher than the same period last year. Meanwhile, the overall discount rate in the new car market has reached 17.4%, resulting in a cumulative loss of more than CNY 138 billion in the new car retail market.

At present, most dealers in the Chinese market are troubled by price wars, which compress their profit costs. More importantly, new energy vehicles simplify the vehicle structure, and their profits and space in maintenance are far less than traditional fuel vehicles, which will also cause a significant decline in dealer business. Among the more than 90 brands in China's electric vehicle market, only BYD and Li Auto have achieved profits. The former relies on the profit from the large sales volume of new energy vehicles, and the latter is due to its high-end positioning and extreme cost-control ability.

2. Sluggish consumption and manufacturer pressure coexist

The dual pressures of the sluggish consumer market and manufacturers' wholesale volumes make it difficult for dealers to digest inventory and face the risk of a broken capital chain. The China Automobile Dealers Association calls on the relevant government departments to pay close attention to the financial difficulties in the auto dealership field and to roll out phased financial relief policies as soon as possible. Meanwhile, the Association also calls on financial institutions not to withdraw, break, or press for loans, to allow flexible extension and continuation, and to increase credit limits and expand the use of loans. In addition, policy banks should set up special credit policies for auto dealers to provide more solid financial support for dealers.

The China Automobile Dealers Association states that it will join hands with industry enterprises and member units to face current challenges, and actively cooperate with relevant government departments to carry out industry research and reflect member demands. Through joint efforts, the association aims to help the vast number of automobile dealers overcome difficulties and promote the healthy development of the automobile circulation industry.