Gasgoo.com (Shanghai November 19) – In first 10 months of this year, the sales volume of passenger cars had reached 15,864,400, increasing by 9.76% on year-on-year basis. The whole market seems optimistic but there are still some problems for auto distributors such as inventory pressure and price war. There are more distributors losing money, closing down, reselling and exiting than past few years.
As the new released 3rd quarter financial statement of auto distributors shows, some big auto distributors group has been caught in loss, such as Pangda Group, Shenhua Group and Yaxia Auto. Shenhua Group was losing money in first 3 quarters last year and lost more this year. The number is increased from 57,000,000 Yuan to 167,000,000 Yuan.
Yaxia auto lost over 15,000,000 Yuan in 3rd quarter and the profit declined by 257%, which leads net profit of only 5,800,000 Yuan in first 3 quarters, declining by 90% on year-on-year basis. Yaxia auto predicts the loss of the whole year will be 20,000,000 Yuan to 40,000,000 Yuan. Pangda Group reached net profit of only 90,000,000 Yuan in first 3 quarters, declining by 70% on year-on-year basis. It is also said Pangda Group has cancelled 103 branches which are 8% of total branches.
To sell car at a loss is no longer something new for Chinese auto market. As related data shows, 86.7% of sales are contributed by new cars, which is absolute advantage in operation revenue and 50% for after-sales service whose profit is more than new cars.
As the information collected by our reporters, the price of intermediate cars are less than 160,000 Yuan now, which should be crucial for profits. The distributors often rely on the profit of after-sales service to cover the loss but it is also difficult to realize at present.
Before the year 2010, Chinese auto had been increasing rapidly but the growth was less than 3% on year-on-year basis after 2011. In recent 3 year, the growth rate has been around slight increase. At the same time, there are more and more auto distributors as channel building and branches construction.
The related data shows there were around 16,000 distributors in China by the end of 2010 and the number was 22,000 in 2013. It is analyzed 40% of auto distributors were at loss in 2012, and the number was 47% by the end of 2013. Some analysts say there are over 60% of auto distributors are at loss or at balance.
The principles of above distributor groups tells reporter the main reason for the loss is the high expectation on auto market. To solve this problem, most distributors usually choose price-off promotion to increase the volume to cover the loss.
The industry analysts has given some ideas such as fast transition to sales and service enterprises and create new modes to operate new cars sales, second hand cars change and after-sales service at the same time.
Mr. Li, who works for BMW distributors, tells reporter auto enterprises still get profits while distributors are at loss. Some enterprises even intervene the operation of distributors illegally. This also leads to relations worsening between enterprises and distributors.
Analysts suggest that auto distributors should dare to communicate with enterprises face to face when they are facing difficulties from the market to discuss reasonable sales target. Only by doing this together, auto enterprises will pay attention on solving problems. And also, enterprises should be responsible for the loss of auto distributors.
