Although the Chinese market is the worldâ€™s biggest, the market is undergoing a period of adjustment as sales cool from previous years where 30% increases in sales were not uncommon.
Several days ago Guangzhou-Honda dealers received an email explaining the process of how to leave the GZ-Honda dealership network, however Chinese media revealed that many dealerships are actively looking to leave the network but the email sent out played out a situation where GZ-Honda were asking poor performing dealerships to leave. In May alone 4 dealerships left the GZ-Honda network, a further 8 are in their last month in business. One GZ-Honda dealership manager quoted by the Auto QQ website said â€œFrom the note sent to us, it looked like the company wanted us to leave, in fact itâ€™s the dealers that want to pull out. Many dealers are losing money year after year and in some cases they are losing up to 10,000RMB on every car.â€
In 2011 China sold 18.5 million, from a 30% sales rise to a slow down on 2.5% increase, but over the past two years manufacturers have rushed to expand their dealership networks, with more inter network competition dealers are learning that profits are harder to make.
China has a total of 65,900 dealers, and several thousand more going through the government application process, if we look at the USA, statistics show that there are just 20,000 new car dealerships in the States, less than a third of China’s. Manufacturers are looking to expand their networks rapidly in the next year, GM are looking to have 600 new dealerships peddling Buick’s, Chevrolet’s and Wuling/Baojun vehicles, Ford will add another 110, FAW-VW alone will double its network from 445 to 800 + dealerships by 2015, and at the same time Fiat and Chang’an PSA will be eager to get their networks up and running.
Dealerships for Honda Motor Co., Chery Automobile Co., BYD Co. and Geely Automobile Holdings Ltd. carried more than 45 days of inventory as of the end of April, exceeding the threshold that foreshadows debilitating price cuts, said Su Hui, vice president of the auto market division at the state-backed China Automobile Dealers Association.
Are we going to see a massive round of discounts on cars to kick start the market? It seems likely, luxury car manufacturers in tier one cities have cut prices dramatically, the outgoing BMW 3-Series has discounts of around 60,000RMB, and the Mercedes C-Class is down some 70,000RMB in certain dealerships around 1st tier cities.