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Dealers reeling under downturn, tougher emission rules
2019-09-13 16:51:52
China's new-vehicle sales have dropped for 14 straight months through August. At Beijing’s request, more than half of the country’s provinces and municipalities have toughened vehicle emission requirements ahead of schedule. The protracted market downturn and new emission rules have devastated dealerships, forcing nearly half of them to be sold and driving several hundred out of business. That’s according to a survey led by Renhedao, a Beijing consultancy on dealership management. Renhedao completed the survey along with Far Eastern Horizon, a Hong Kong finance and leasing company, and Beijing magazine Auto Business Review. While the information can’t be found or verified by the China Automobile Dealers Association, a government-affiliated trade group, it paints another picture of the challenges facing the country’s once-hot market, one still saddled with too many brands and plants. The survey, which covered dealerships under 82 automotive brands in 320 cities, offers outsiders a rare glimpse into the tough world of most car dealerships in China. Among the country's 31,000-plus dealerships, 44 percent suffered losses, only 29 percent were profitable and the rest broke even in the first half of this year, according to the survey. The survey also shows that the lower a brand is positioned in the market, the harder its dealerships were hit financially. The luxury segment is the only one that has continued to grow, so luxury dealerships have held up relatively well. In the first six months, 43 percent of stores marketing luxury brands were profitable, a drop of 2 percentage points from the same period last year. On the other hand, the share of luxury dealerships that racked up losses also dipped 2 points, to 30 percent. The picture is different for foreign mass-market brands, which typically target the middle of the market. In the first half, the share of their dealerships that still generated profits decreased 4 percentage points to 29 percent while stores that reported losses rose 2 points to 43 percent. The hardest hit dealers represent domestic Chinese brands, most of which target the low end of the market. Only 20 percent of these dealerships still made money, 2 percentage points lower that a year earlier. Meanwhile, the proportion of unprofitable stores jumped a whopping 10 points to 59 percent. The survey also reveals that some 15,300 dealerships changed hands and more than 500 closed in the first six months. China’s new-vehicle market has been shrinking since July 2018. Last year, annual new-car deliveries declined for the first time in nearly three decades. In addition to the extended downturn, stricter emission rules have hurt the profit margins on new-car sales, Renhedao pointed out in the report. As of July 1, 16 of China’s 31 provinces and provincial-level municipalities, such as Shanghai and Beijing, had tightened vehicle emission standards ahead of an original schedule. The move forced a large number of dealerships to offer steep discounts in May and June on vehicle inventory that fell short of the stricter rules. Sales are on track to decline for the second straight year. And pressured by an environmental protection campaign Beijing launched last year, more provinces are likely to embrace the tougher emission rules.
Miss.Ren Ting

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