Despite strong electric vehicle sales in China, a price war among brands has led to intense competition and a high inventory of vehicles.
The China Automobile Dealers Association (CADA) has submitted an urgent report to relevant government agencies, drawing attention to the growing losses faced by dealerships. The association warns that this situation could lead to a systemic collapse of the automotive distribution and retail industry.
From January to August 2024, CADA members incurred losses of up to CNY 138 billion (~ VND 484.4 thousand billion), mainly due to deep and frequent price cuts by manufacturers.
CADA’s report, titled “Urgent Report on the Financial Difficulties and Closure Risks of Automobile Dealers,” identifies two main issues: a significant drop in consumer purchasing power and manufacturers pushing more vehicles to dealerships than market demand.
The aggressive price cuts to clear inventory have resulted in a “sell more, lose more” situation. According to the report, the average discount rate for new cars reached 17.4% in August 2024.
Additionally, the ongoing price war has led banks to tighten credit limits for dealerships. Without financial support, the automotive retail business, including 3S centers that provide after-sales support to buyers, will collapse. The association states that the working capital of many car dealerships has been “pushed to the limit.”
“Since the beginning of this year, the media has continuously reported on the bankruptcy of domestic car dealerships both domestically and regionally. Most of these failures are due to liquidity issues rather than the dealerships’ operations, and ultimately, it is the enterprises themselves that suffer. The collapse of the capital chain leads to business closure,” CADA said.
The association is urging Chinese authorities to address this issue to prevent a systemic collapse of the country’s automotive retail industry. They hope that relevant agencies will take decisive action to provide temporary financial relief.
Out of 90 electric vehicle brands, only two are profitable
Currently, there are approximately 150 automobile brands in China, with around 90 brands focusing on new energy vehicles (NEVs), including plug-in hybrid electric vehicles (PHEVs) and extended-range electric vehicles (EREVs). The latter uses a small engine to generate electricity.
China classifies pure electric vehicles (BEVs) and PHEVs as new energy vehicles (NEVs). As a result, international communities often misinterpret China’s NEV statistics as solely comprising pure electric vehicles.
Out of the approximately 90 new energy vehicle brands in China, only two are profitable: BYD and Li Auto. Both companies believe that the future will not be a purely electric vehicle world. Nearly half of BYD’s sales depend on PHEV models, while out of the five models sold by Li Auto, only one is a pure electric vehicle, and the rest are EREV models.
According to Gasgoo data as of June 2024, in the sales of NEVs, BEVs accounted for 56.4%, PHEVs 31.9%, and EREVs 11.7%.
TT (Tuoitrethudo)
References: Wapcar
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