China Auto Association Raises Concerns Over Dealership Losses to Government

BEIJING (Reuters) – Car dealers faced substantial losses amounting to 138 billion yuan ($19.55 billion) during the first eight months of the year, primarily due to the necessity of offering significant discounts on new cars, according to the China Automobile Dealers Association (CADA).

This alarming figure was highlighted in an urgent report submitted by CADA to government authorities, detailing the financial challenges and potential shutdown risks that dealerships are currently experiencing amid a price war in the world’s largest auto market.

High dealer inventories, coupled with sluggish consumer demand, have pressured dealers to sell vehicles at lower prices, as stated in a report shared by CADA on WeChat. The overall discount rate for new cars reached 17.4% in August, according to CADA’s data.

CADA pointed out that the failure of many regional and national dealerships can largely be attributed to "capital chain rupture" instead of their operational shortcomings. A notable example is China Grand Automotive Services, the country’s second-largest dealership, which was removed from the Shanghai stock exchange in August after its share price fell below par value for 20 consecutive days.

In response to the ongoing crisis, CADA is urging the government to increase financial assistance directed at private dealerships, which are a significant part of the automotive circulation sector.

Despite the overall decline in car sales in China for the fifth consecutive month in August, there was an uptick in sales of all-electric and plug-in hybrid vehicles, spurred by government subsidies aimed at encouraging the trade-in of more polluting cars.