|
 Automakers largely stuck to targets throughout 2014, selling cars to
dealers on schedule. But dealers slashed retail prices and booked
losses as sales growth in the world's biggest auto market halved
from the previous year's 14 percent.
"Carmakers have high market expectations. But the reality is: supply
exceeds demand," said Luo Lei, deputy secretary general of the China
Automobile Dealers Association (CADA).
"In the past, dealers were angry, but dared not speak out. But now,
they have to shout because the situation is getting so unbearable,"
said Luo, whose body this month filed a report with authorities on
the practice of transferring stock to dealers.
The report from China's biggest dealer body could help change the
balance of power at a time when automakers are starting to alter
expectations in an economy expanding near its slowest rate in 24
years.
Japan's Honda Motor Co Ltd and Nissan Motor Co Ltd cut their China
sales forecasts last month while executives say Toyota Motor Corp is
likely to miss its 2014 goal. Germany's BMW said it expects profit
margins to narrow as the market "normalizes" from the growth spurt
of the past few years.
"Carmakers are making a compromise to dealers" in their worst-ever
spat, said Yale Zhang, managing director of consultancy Automotive
Foresight.
"Over the past years, carmakers, especially luxury brands, have been
too aggressive in their quest for China market share. Now with the
problem fully exposed, I expect to see an obvious slowdown in their
pace of expansion next year."
LISTENING
Honda has been helping dealers "adjust" inventories since the middle
of the year, a company spokesman said. Honda's China sales have
fallen every month since July.
BMW China head Karsten Engel said in an interview last month that
the luxury carmaker had "listened" to dealers saying stockpiles were
building up, and that it had started "reducing wholesale supplies".
The reduction contributed to BMW's sales growth slowing to 8 percent
in the third quarter from over 20 percent in the first half.
BMW in a statement said it is in continuous dialogue with dealers
about all aspects of business development including targets, and
that it is in its interest for dealers to be profitable.
[to top of second column] |
EXCESSIVE POWER
In its report to the government, CADA said automakers have
"excessive power" as their targets essentially obligate dealers to
buy their cars. That means automakers still earn a profit whereas
dealers suffer "rampant losses" because of an inability to sell
excess stock to consumers, CADA said.
In separate reports, CADA said 30 percent of dealers profited this
year compared with 70 percent in 2010, and that inventories were
equivalent to 1.8 times monthly sales, above the "alert line" of
1.5. A stockpile of 0.8 times to 1.2 times is generally considered
healthy, industry analysts say.
The Jiangsu Automobile Trade Management Association this month said
30 of 34 FAW Toyota dealerships in the eastern province were losing
money, partly because they were obliged to buy a set number of cars
from FAW Toyota or face penalty fees.
Toyota venture FAW Toyota Motor Sales Co said in a statement posted
on the Jiangsu association's website that it had lowered sales
targets and slowed the pace of network expansion in eastern China to
protect dealers' profitability.
"For a long period of time, manufacturers have been in a dominant
position," said Chen Ning, deputy secretary general of the Jiangsu
association. "We haven't yet seen any improvements in dealers'
situation. Many of them are still struggling on the verge of
survival."
(Editing by Christopher Cushing)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
