Media reports buzzed this week with the story that China’s car dealers are struggling with significant financial losses. According to the Business Standard, those losses amounted to more than 138 billion yuan ($19.55 billion).
They say it’s due to sluggish consumer demand and pressure on OEM wholesale sales, both of which helped to keep dealer inventories high. An ongoing price war has not helped the situation. Citing a report from the China Automobile Dealers Association (CADA), the Business Standard said “the ongoing price war has exacerbated the issue, with dealers now selling vehicles at a loss.”
Media outlet CnEVPost published a section of the CADA’s report, in which they said the price wars make dealers “sell below cost, and the more they sell, the more they lose.” Dealers are also struggling to repay the due financing and “the risk of capital chain breakage increased steeply.”
The CADA is calling on the government to start researching the financial environment of the auto retail sector so they can better understand the needs of dealers in China. The association also wants the government to “study and formulate policies to support financing” the industry, according to CnEVPost.
They included other suggestions as well, as part of the association’s emergency report to the government. A Reuters report noted that the association wanted more financial support for private dealerships, as they make up a large piece of the “automobile circulation industry.”
The CADA posted many of their comments on WeChat.
