On Wednesday, July 17, the second largest car dealer in mainland China closed for the 20th consecutive trading day below 1 yuan per share in Renminbi, facing delisting based on trading rules. This reflects the escalating internal turmoil in the Chinese economy and automotive market, leading to the latest outcome of investors losing confidence in the industry.
China Grand Automotive Service Group, headquartered in Shanghai, opened at a halt on Wednesday (stock code 600297), with a price of only 0.78 yuan per share. On Tuesday, July 16, the company’s stock plummeted by 10%, closing at 0.87 yuan (equivalent to 12 cents in USD).
In May 2023, Pangda Auto Trade Group was delisted due to falling below face value, and delisted at the end of June. Only a year later, China Grand Automotive is set to become the second car dealer to lose its listing qualification.
According to the latest announcement from China Grand Automotive, the company’s stock has been trading below 1 yuan per share for 20 consecutive trading days, triggering the conditions for termination of listing according to the rules of the Shanghai Stock Exchange. The stock of China Grand Automotive may be delisted by the Shanghai Stock Exchange and trading will be suspended starting from Thursday, July 18.
The South China Morning Post quoted Ding Haifeng, a consultant at Integrity, a financial advisory firm in Shanghai, as saying, “The company’s stock has been neglected by investors, reflecting their bearish outlook on the business prospects of car dealers. The increasing adoption of electric vehicles, new sales models, and intensified competition have made survival extremely difficult for gasoline car dealers.”
Alongside the decline of China Grand Automotive’s stock, the convertible bonds of the company also hit the limit down, with a cumulative deviation from the closing price for three consecutive trading days exceeding 30%, indicating abnormal fluctuations in convertible bond trading. According to the company’s announcement, trading of China Grand Automotive’s convertible bonds will be suspended starting from Thursday, with conversion of bonds temporarily halted.
As per China Grand Automotive’s quarterly report in 2023, the company’s largest shareholder is Xinjiang Grand Investment (Group) Co., Ltd. Public information reveals that the controlling shareholder of this group, Sun Guangxin, is the richest man in Xinjiang. It is rumored that Sun Guangxin has made his fortune by developing bankrupt factories into real estate with the support of the Communist Party and holds the rank of captain in the People’s Liberation Army.
According to the ranking of Chinese car dealers released by the China Automobile Dealers Association at the end of May 2023, China Grand Automotive topped the list by selling over 713,000 vehicles through more than 730 nationwide locations, including brands like BMW, Audi, and Volvo. The company ranked first in sales volume and second in sales revenue, second only to China National Chemical Group Holding Corp.
The automotive industry in China has been experiencing escalating internal turmoil this year. According to a survey report released by the China Automobile Dealers Association, only 27.3% of dealers achieved their annual sales targets in 2023, with 43.5% of them operating at a loss. Market leaders like China National Chemical Group saw a profit decline of 24.70%, while other companies such as Yongda Auto, Meidong Auto, Xinfengtai Group, and Betrou Holding suffered profit drops of over 60%.
New energy vehicle brands in China have increasingly adopted direct sales models, squeezing the survival space for dealers. Additionally, the “price war” has further reduced the profit margins for dealers, leading to increased business pressure and risks.
Data from the China Automobile Dealers Association also shows that in May this year, the inventory warning index for Chinese auto dealers rose to 58.2%, exceeding the alert line, indicating increased inventory pressure.