Recently, in the first eight months of this year, Chinese automotive companies engaged in a “price war” leading to an overall retail loss of 138 billion yuan in the new car market, causing a financial crisis for car dealers. The China Automobile Dealers Association has submitted an urgent report to the Chinese Communist government regarding this issue.
According to a statement from the China Automobile Dealers Association, the association has received a large number of feedback from its member companies in recent times, highlighting the drastic changes in the automotive market caused by the ongoing “price war” and other factors, putting car dealers in a difficult situation with extremely tight liquidity issues.
The association immediately launched extensive research and analysis work to comprehensively reflect the current financial difficulties and risks of closure faced by car dealers.
Recently, the association officially submitted an “Urgent Report on the Current Financial Difficulties and Risks of Closure Faced by Car Dealers” to relevant government departments.
The report points out that car dealers are currently experiencing widespread losses in new car sales, with common cash flow deficits and exacerbated risks of financial disruption, making it difficult for them to survive.
The two main problems faced at this stage are: first, weak consumer demand and the double pressure of high wholesale volumes from manufacturers keeping dealer inventories high, leading dealers to sell at low prices to reduce financial pressure and financing costs just to survive. Second, the “price war” has caused serious disruptions in sales, where the more dealers sell, the more they lose, and they also face pressure from difficult financing deadlines, leading to operational cash flow interruptions and increased risks of financial disruption. Currently, dealers’ existing liquid funds are being squeezed to the limit.
According to monitoring data from the association, as of August this year, the figure for sales exceeding purchases among dealers has reached a high of -22.8%, which is 10.7 percentage points higher than the same period last year.
According to data analysis by association experts, in August, the overall discount rate in the new car market was 17.4%. From January to August this year, the “price war” has caused an overall retail loss of 138 billion yuan, significantly impacting the healthy development of the industry.
The association is urging relevant government departments to pay close attention to the financial difficulties and closure risks faced by the automotive dealership sector and to decisively implement phased financial relief policies to effectively prevent the occurrence of systematic risks in the automotive dealership sector.