China’s car dealerships facing losses of almost US$20 billion

CAR dealerships across China are facing losses of almost US$20 billion as consumers hold off on making major purchases and vehicles pile up in sales lots.

The country’s car retailers are experiencing “extremely intense liquidity” and looking at losses of about 138 billion yuan (S$25.3 billion) for the first eight months of 2024 alone, the China Automobile Dealers Association said in a statement on Monday (Sep 23).

It called on the government to more closely monitor the financial risks faced by dealerships given the widespread problems in the sector and offer more financial support.

While sales of new-energy vehicles in China are relatively strong, retail passenger car sales overall are more muted, expected to rise just 4 per cent year on year in September, China’s Passenger Car Association said last week. Government subsidies encouraging drivers to trade in older cars are largely responsible for the NEV sales surge but dealerships are hurting due to the industry’s continued price war.

The country’s best-selling automobile brand, BYD, started a fresh wave of discounting at the start of the year, the latest in a ferocious round of cost cutting that’s been going on since the beginning of 2023 in an effort to get consumers to buy more cars.

The China Automobile Dealers Association noted that sluggish consumption is to blame for dealerships’ losses, adding that wholesale inventory levels are high, meaning showrooms are then forced to offload excess stock at rock bottom prices. BLOOMBERG