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The Chinese domestic market's rapid transition towards all-electric mobility has left the country's dealership groups struggling to make profits amid a fierce price war in the sector.
In a post on the Chinese social media platform WeChat on Tuesday, Cui Dongshu, the secretary general of China Passenger Car Association, shared that the rapid growth of new energy vehicles in the market was leading to overcapacity and fierce competition.
He urged authorities to offer more support for dealers in the form of funding and urged financial institutions to exercise flexibility with dealerships. Cui added that lofty targets have led to dealers offering steep discounts, which have eaten into profits.
"The double pressure of sluggish consumption and wholesale volume of manufacturers makes dealers maintain high inventories, in order to reduce capital pressure and financing costs, dealers are forced to sell low prices for survival," Cui said in the post. He also took aim at the country's ongoing EV Price War.
Dealers have added companies like Xiaomi Corp (OTC:XIACF) (OTC:XIACY) as well as Li Auto Inc. (NASDAQ:LI) to their portfolios, but it could take some time for them to see profits, Cui said.
The news comes as the Chinese government recently announced it was adopting measures to curb fraudulent activities and false marketing in the domestic auto sector by launching a three-month campaign. The campaign would target behaviors such as false advertising, illegal profit-making and malicious defamation.
Meanwhile, Qiancheng Holdings, a BYD Co. Ltd. (OTC:BYDDY) (OTC:BYDDF) dealer, closed down 20 dealerships it operated in China's Shandong province, citing changes to the automaker's dealership policies affecting the company's cash flow earlier this year.
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Disclaimer: The original source is in Chinese and the quotes have been translated into English
Photo Courtesy: Natee Meepian On Shutterstock.com
