Retailers of mainstream global brands go dark

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SHANGHAI — Government lockdown measures aimed at containing a coronavirus outbreak have taken their toll on Chinese car dealerships in the first half of the year.

Mainstream international brand stores were the hardest hit during the period, when lockdown measures hampered showroom traffic and disrupted light vehicle production and shipments.

What’s more, there doesn’t appear to be an immediate end to their woes as demand for luxury brands remains robust and domestic automakers build a formidable presence in the electrified vehicle market, according to a report from the China Automobile Dealers Association. released this week.

The report, based on a survey conducted by CADA in July, shows that 27% of dealerships in China were profitable in the first six months, compared to 54% for all of 2021.

Among stores with global consumer brands, only 12% made money in the first half.

In contrast, 14% of Chinese brand stores and 53% of luxury brand stores were profitable during the period.

The survey showed that 28% of dealers carrying global consumer brands racked up losses in the first half. Only 14% of Chinese brand stores and 9.6% of luxury dealerships were unprofitable.

Automakers around the world have prioritized the production and sales of their most profitable vehicles to address the global chip shortage.

CADA also found that global mass-market brands received the lowest score, 72.1 points on a 100-point scale, which measures dealer satisfaction with automakers.

In contrast, Chinese brands and luxury brands scored 79 points and 79.7 points respectively.

Mainstream brand dealerships say their biggest problem is automakers overloading them with hard-to-sell vehicles.

China’s overall new-vehicle market has rebounded for two consecutive months after Beijing eased anti-pandemic measures and implemented tax relief on gasoline-powered vehicles in early June.

CADA estimates that retail sales of new vehicles, including sedans, crossovers, SUVs and multi-purpose vehicles industry-wide, will rise 18% to 1.77 million in July after surging 23% the previous month.

However, most dealers remain pessimistic about the market outlook. Only 30% of dealers covered by the survey believe new vehicle sales will remain flat or increase this year from 2021 levels.

When it comes to investing in existing stores or making acquisitions, dealers also remain very cautious.

For dealers who intend to expand and invest in new businesses or stores, their targets are mainly luxury brands and electric vehicle brands created by Chinese manufacturers.

Apart from two big Japanese brands – Toyota and Honda, which outperformed their global counterparts in the market – few other mainstream international brands have attracted dealer interest in the investment, according to the survey.

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