China's Carmakers, Dealers Slug It Out Over Slackening Sales
Yang Haiyan
/SOURCE : Yicai
China's Carmakers, Dealers Slug It Out Over Slackening Sales

(Yicai Global) Aug. 14 -- Automakers and car dealers are supposed to be close partners within the auto sector chain. However, the mutually-reliant relationship has weakened amid a general market downturn, and spats are breaking out between them with greater frequency.

A photo showing investors in Anhui Zotye Automobiles' dealerships protesting the car maker outside the entrance to the latter's production base in Linyi in eastern Shandong province recently went viral on the internet.

Several Volvo Car dealers from central China's Henan province earlier organized similar protests at its Chinese sales headquarters, demanding nearly CNY4 million (USD581,000) in overdue profit payments after allegedly being bumped from the Swedish giant's network.

"Dealers and manufacturers are a synthesis of benefits and conflicts," veteran auto market observer Ding Lei told Yicai Global, "Everyone is happy when the market is booming, but conflicts are inevitable when the market isn't doing so well."

Domestic passenger car sales were only up 2 percent on the year during the first seven months, showing a further slowdown in sales growth, and fell to a multi-year low last month, the latest statistics from China Passenger Car Association indicate.

"All the signs are pointing to the same conclusion -- that is, the rapid growth of the auto market is no longer replicable -- so both manufacturers and dealers need to consider how they should respond," Ding argued.

In a typical overseas mature market, roughly 70 percent of dealers' profits come from aftersales and value-added services, and pre-sale profits only make up about 33 percent of the total, but the opposite is true in China, he stated. 

"Apart from sales, dealers rely mostly on monthly and quarterly rebates offered by car makers and aftersales parts commissions as sources of profit, and their efforts to foster [new] profit growth drivers have been inadequate," he noted.

Editor: Ben Armour

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Keywords: Business Performance , Auto Dealer , Auto Makers , Sector Analysis