Several car dealerships in mainland China are unable to provide vehicle qualification certificates at the time of sale, causing car owners to have delays in registering their vehicles. Industry insiders have revealed that this is mainly due to the price wars initiated by car manufacturers.
The Shanghai Automobile Sales Industry Association issued a consumer advisory titled “Notice on Some Car Dealerships Delaying New Vehicle Qualification Certificates” on July 17th. It warns prospective car buyers that some dealerships have repeatedly failed to provide vehicle qualification certificates upon delivery of new cars, urging consumers to be cautious of such situations.
According to a salesperson from a major car manufacturer, the root cause of dealerships withholding qualification certificates lies in financial difficulties. The salesperson mentioned that only a few dealerships in the market can use their own funds to take delivery of vehicles from manufacturers, while the majority have to seek loans from banks or financial institutions, using the vehicle qualification certificates as collateral. Once the vehicles are sold and payments are made by consumers, dealerships repay the loans to banks, and the certificates are returned, enabling new cars to be registered and licensed.
However, due to intense price wars among Chinese car manufacturers this year, a significant disparity has emerged between the delivery and retail prices of cars. A salesperson who recently left a luxury brand dealership revealed that the price difference between acquiring and selling cars can sometimes be tens of thousands of RMB, forcing dealerships to wait until more new cars are sold to reclaim the qualification certificates of previously sold vehicles. The already challenging situation in new car sales, coupled with slowed funding turnover, further disrupts the normal delivery process, leading to a vicious cycle in store operations. The difficulty in redeeming qualification certificates mainly occurs with luxury and joint venture brands due to their high price differences.
A dealership representative from a state-owned car dealership in Guangdong province mentioned that both high-end and mainstream joint venture brands are currently facing tough times.
On August 10th, the China Automobile Dealers Association released the inventory survey results for July 2024. The survey indicated that the inventory coefficient for high-end luxury and imported brands in July was 1.38, an increase of 34% from the previous period. The coefficient for joint venture brands was 1.63 (indicating it takes 1.63 months to sell out the inventory), a 14.8% increase, and for independent brands, it was 1.47, a 3.9% decrease from the previous period.
In order to capture market share in the Chinese automotive market, Chinese car manufacturers have been slashing prices and engaging in price wars since the beginning of 2024. However, these price wars have led to shrinking profit margins for car manufacturers and supply chain companies. According to data from the China Association of Automobile Manufacturers, the profit margin for the automotive industry in the first five months of 2024 was 5.3%, lower than the average profit margin of 6.1% for industrial enterprises during the same period. During the 2024 China Automobile Forum held on July 12th, Vice Minister of the Ministry of Industry and Information Technology, Xin Guobin, acknowledged that the demand for cars in China is not vigorous, leading to intense competition and disorderly competition that is impacting the stability of industry chains and supply chains.