Loss about $700 on selling a vehicle; Second-hand dealers can't sell a single car a month.
Summary
TLDRThe automotive market in China faces a dire situation with plummeting car sales, intense competition, and an oversupply issue. Dealerships struggle with low consumer demand and financial pressures, leading to closures and bankruptcies. Despite government subsidies, the market remains sluggish, affecting both new and used car sectors. Luxury car brands like BMW, Mercedes-Benz, and Audi are caught in a price war, shifting focus to stabilize prices and improve sales quality.
Takeaways
- 🚗 The new car market in Ran is experiencing a severe price war, with dealerships selling the same car at vastly different prices, making it difficult to sell even at low prices.
- 📉 Car sales have been declining, with dealerships struggling to sell inventory that has been sitting for months, indicating a lack of demand for new cars.
- 💔 The overall market for automobiles is described as 'dire,' with even popular brands like Tesla and BYD seeing a significant drop in sales compared to peak periods.
- 🏦 The China Passenger Car Association reported that consumer spending is sluggish due to a slow economic recovery, despite government subsidies introduced to encourage car trade-ins.
- 📊 National passenger car market sales statistics show a continuous decline for three months, with a year-on-year decrease of 6.9% in June.
- 💼 The script highlights the dilemma of the car market, where both those who have bought cars and those who haven't are left with empty wallets, affecting the market's dynamics.
- 📉 SAIC Group, China's largest automaker, faces significant obstacles with a drop in annual sales from over 7 million vehicles in 2018 to just over 5 million in 2023, and financial pressure due to poor performance of high-end EVs and EU tariffs.
- 🛑 The collapse of large car dealerships like Sen One Group and the financial crisis of others have left many car owners in limbo, having paid for cars they have yet to receive.
- 📉 Both new and used car markets are struggling, with the transaction volume of the secondhand car market decreasing and many dealers facing losses.
- 📈 The average inventory cycle for used cars has increased, indicating longer times to sell vehicles and increased financial strain on dealers.
- 💡 The script suggests that the car market may only improve when car companies stop exaggerating promotions and electric cars become the true path forward, hinting at a potential shift in consumer preferences.
Q & A
Why can't new cars be sold in Ran?
-The intense competition in the car market in Ran leads to a situation where new car dealerships are quickly saturated, resulting in a surplus of cars that are difficult to sell even at low prices.
What was the price of the car mentioned in the script that was bought in March?
-The car bought in March was priced at 20,000 with a down payment of 3,900.
What is the current situation of the automobile market in July according to the script?
-The market situation in July is dire, with a lack of demand for cars, increasing inventory, and decreasing prices that still fail to attract buyers.
How did the China Passenger Car Association describe the consumers' willingness to spend on cars?
-The China Passenger Car Association reported that consumers' willingness to spend is sluggish due to China's slow economic recovery, despite government financial subsidies introduced to encourage car trade-ins.
What was the year-on-year decrease in national passenger car market sales in June as per the report?
-The year-on-year decrease in national passenger car market sales in June was 6.9%.
What challenges are faced by car dealers in the current market?
-Car dealers are facing challenges such as heavy losses, increased competition, bank credit threshold increases, and complex new loan processes, leading to significant operating pressures.
How has the performance of high-end EVs and the EU's additional tariffs on Chinese EVs affected SAIC Group?
-The performance of high-end EVs and the EU's additional tariffs on Chinese EVs have led to a significant financial pressure on SAIC Group, contributing to a decline in sales and revenue.
What was the sales volume of SAIC Group in the first half of 2024 according to the survey by the China Automobile Dealers Association?
-According to the survey, in the first half of 2024, only 18.4% of dealers completed half of their sales tasks, indicating a significant drop in sales volume.
What is the current state of the secondhand car market in China?
-The secondhand car market in China is struggling with a decrease in transaction volumes, extended inventory turnover periods, and a high percentage of dealers suffering losses.
How have foreign automakers responded to the challenges in the Chinese market?
-Foreign automakers have responded by tightening spending, ceasing production at some plants, selling factories to local companies, and in some cases, completely withdrawing from the Chinese market.
What strategy have luxury car brands like Mercedes-Benz, BMW, and Audi adopted to cope with the market situation?
-Luxury car brands like Mercedes-Benz, BMW, and Audi have adopted a strategy of reducing volume and stabilizing prices to provide dealers with a more relaxed environment and to improve the quality of sales and after-sales services.
Outlines
🚗 Struggling Car Sales Market
The video script discusses the severe downturn in the car sales market, emphasizing that new cars in Ran are difficult to sell due to fierce competition and declining demand. The market situation in July is particularly challenging, with cars sitting unsold for months and prices dropping continuously. The script highlights the overall economic impact on the automobile industry, including the significant pressure on all car brands, reduced sales, and increasing inventory. Despite government subsidies, consumer willingness to spend remains sluggish, contributing to a continuous decline in sales and an oversupply issue in China's auto market.
🏦 Financial Crisis of Car Dealers
The script details the financial crisis faced by car dealers, specifically focusing on the implosion of the Jangu Group and the subsequent collapse of Senone Group. Many car owners who had paid for their vehicles were left without their cars, and those who took loans were hit the hardest. The financial troubles were attributed to previous investments in particular brands, and while some brands continue to operate, sales are typically at a loss. The script also mentions the increased complexity of securing new loans and the significant operating pressures faced by car dealers, with many reporting substantial drops in sales and profits.
📉 Collapse of the Secondhand Car Market
The script highlights the challenges in the secondhand car market, noting a significant decrease in transaction volumes and a high rate of loss among dealers. It provides examples of the drastic decline in sales and profits, with many vehicles sold at a loss or breaking even at best. The inventory cycle has lengthened, and the capital turnover rate has dropped, leading to severe financial difficulties for dealers. The script also points out that secondhand cars become unsellable when new car prices drop, further exacerbating the market's troubles. The dire situation has led to predictions that the industry may disappear within two years.
🚘 Impact of Price Wars on Luxury Car Dealers
The script discusses the impact of price wars on luxury car dealers, particularly for brands like Mercedes-Benz, BMW, and Audi. Despite efforts to cope with the market downturn, many luxury car dealers are struggling with losses. BMW has provided subsidies to ease business pressures, while Mercedes-Benz and Audi have implemented price adjustments. The script notes that luxury car brands are focusing on improving business quality and exiting the price war to stabilize prices. This strategy aims to provide a more relaxed environment for dealers and maintain the value of luxury brands.
Mindmap
Keywords
💡Car dealership
💡Market competition
💡Inventory
💡Sales decline
💡Economic recovery
💡Passenger car market
💡Price war
💡Financial crisis
💡Used car market
💡Luxury cars
💡Oversupply
Highlights
New cars in Ran cannot be sold due to intense competition and price discrepancies.
A car bought in March for $20,000 with a down payment of $3,900 faced a lack of interest from buyers.
The automobile market is experiencing a dire situation with a lack of demand and an oversupply of cars.
China's economic recovery is sluggish, affecting consumers' willingness to spend on cars.
Government financial subsidies introduced in April to boost car trade-ins had insignificant effects.
National passenger car market sales in June showed a decline for the third consecutive month.
People who wanted to buy cars have already done so, leaving the market with empty wallets and no purchasing power.
SAIC Motors faces significant obstacles due to declining sales and the EU's tariffs on Chinese EVs.
SAIC Group's sales have dropped significantly from over 7 million vehicles in 2018 to just over 5 million in 2023.
Many car dealers are struggling, with only 18.4% completing half of their sales tasks in the first half of 2024.
The financial crisis of Jangu Group has led to the closure of over 600 stores and missing leadership.
Car dealers are selling vehicles at a loss to prevent inventory from increasing, which complicates sales further.
The used car market is also struggling with a transaction volume decrease and dealers facing losses.
The average inventory cycle for the used car industry has increased, indicating slower sales and financial strain.
Luxury car brands like Mercedes-Benz, BMW, and Audi are experiencing a price war, affecting dealer profitability.
Some foreign automakers are withdrawing from the Chinese market due to shrinking market share and financial pressures.
Dealers are shifting focus to business quality and exiting price wars to maintain the value of luxury brands.
The overall market sentiment is one of increased consumer rationality and a preference for maintaining current vehicles over purchasing new ones.
Transcripts
[Music]
indeed new cars in Ran cannot be sold
you see as soon as there is talk of
opening a car dealership there are one
or 20 of them in quiny your place sells
it for
$30,000 and his place sells it for just
over
$2,000 the car we bought here in March
was only 20,000 with a down payment of
3,900 but no one wanted it the
competition is fierce
now nowadays I need more confidence in
selling cars the market situation in
July could be better if a single
customer intends to buy a car I don't
know what to do these cars have been
here for almost 2 months and the
recently arrived have been here for
almost a month you can't even sell them
cheaply the whole Market is gone and
there is no demand for cars we can wait
there is no other good
way it is getting harder and harder to
make money now and almost all Industries
have been affected including our
automobile industry more and more cars
are in stock every day and the prices
are getting lower and lower but they
just won't sell even if the profit is
small we must sell it as soon as
possible to prevent the inventory from
increasing which makes it even more
difficult to sell the current automobile
Market is not just challenging it's dire
almost all car brands are under
tremendous pressure and selling cars is
becoming increasingly difficult whether
it is a hot selling brand like Tesla or
the domestic byd sales are declining
even if tens of thousands of vehicles
are sold monthly sales are little
compared to the peak period the China
passenger car Association released a
report on July 8th stating that
consumers's willingness to spend is
slugish due to China's sluggish economic
recovery although the government
introduced Financial subsidies in April
to encourage the tradein of Passenger
cars the effect has been insignificant
in recent months the key points in
National passenger car market sales
statistics in June were 1.78 million
units declining for the third
consecutive month and a year-on-year
decrease of
6.9% why are the prices of cars so low
but fewer and fewer people are buying
them the current situation is that
people who wanted to buy a car have
already bought it and their wallets are
empty people who have not purchased a
car still have no purchasing power and
their wallets are empty as well this
dilemma has put the market in an awkward
position some medens explain that when
walking on the streets they see the
young people riding the subway the
middle-aged riding shared bicycles and
older folks driving secondhand cars only
when the market no longer squeezes car
companies bosses stop exaggerating and
promoting and electric cars truly become
the path forward will it be possible to
usher in a new car buying spree many
large automobile companies need help
sustaining themselves in such an
environment due to the continuous
decline in sales and the poor
performance of high-end EVS coupled with
the eu's additional tariffs on Chinese
EVS China's largest automaker saic
Motors faces significant obstacles the
overall domestic economic environment
has led to an over Supply issue in
China's auto market and figures of the
sales of internal combustion vehicles
have shown a cliff-like decline for for
saic it is a situation that adds insult
to
injury saic group's annual sales have
dropped from more than 7 million
vehicles in 2018 to just over 5 million
in 2023 in 2023 saic Group sold 5.21
million vehicles with a total operating
revenue of $ 2.43 billion US however as
sales continue to decline the company
faces significant financial pressure due
in part to the performance of high-end
EVs and the eu's additional tariffs on
Chinese
EVS the latest data shows that saic
group's June sales were
3,500 Vehicles a 25.9 2% decrease from
the previous June cumulative sales in
the first half of this year were 1.82
million Vehicles down 11% from the
previous June this performance only
achieved 33% of saic group's annual
sales Target of 5.45 million Vehicles
according to a survey conducted by the
China Automobile Dealers Association on
July 10th in the first half of 2024 only
18.4% of dealers completed halfe sales
tasks
34.8% of dealers completed more than 80%
of the tasks and 13.5% of dealers have
not completed 50% of the tasks Auto
Sales are under significant
pressure many media Outlets recently
reported on jangu group a large Regional
car dealers financial
crisis
after group's
implosion the largest car dealer in
yince also collapsed sen owns more than
604s stores and represents more than 20
Brands now they are all closed the boss
ran away and other leaders from
headquarters also went missing the most
unlucky are the car owners who have paid
for the car but have yet to pick it up
especially those who took out loans to
get more discounts not only did they not
get the car they had to continue
repaying the loan they were
screwed subsequently senone group
tweeted through its official WeChat
public account responding that the
group's financial crisis was real and
was actively trying to preserve itself
when media reporters from China's daily
economic news try to call the numbers of
several brands owned by Yan Chung sen
international automobile City they found
that many calls were unanswered a nzen
who picked up a car at a 4S store owned
by sen in Yen jangu said that because
the car certificate was mortgaged for a
bank loan the car could not get the
license plate and could only sit the
reporter learned that sopone group had
financial problems due to its previous
investment in a particular brand now
some brands are still operating normally
for example an investor in yango has
taken over the wind Experience Store and
sales and after sales have remained the
same after sales manager Jing said that
currently on average vehicles are sold
without profit only breaking even but
gasoline vehicles are being sold at a
loss since the outbreak the company has
lost about
$688 for every car sold while employee
salaries and commissions have been paid
typically with monthly operating cost
costs of about
$140,000 due to the many car owners and
employees store closure is not being
considered some staff reported that the
average monthly overall sales volume in
binghai County was 150 to 200 Vehicles
compared with previous years sales fell
by 26% and profits fell by 10 to
15% competition is fierce Bank credit
thresholds have increased new loans have
become more complex and and operating
pressures are
enormous this year financial problems
have plagued sunone group and affected
other car
dealers Wong Yong Investment Group was
exposed to bankruptcy in many of its
four S stores in
January on February 29th guong yonga
Investment Group announced that it would
officially close its business on March
1st due to poor management and serious
debts while the new car market has been
hit hard the used car market has also
been struggling according to data from
the China Automobile Dealers Association
the transaction volume of the secondhand
car market in May this year was 1.58 46
million units a month-on-month decrease
of
5.62% data from July last year showed
that as many as 92% of secondhand car
dealers suffered losses posing severe
challenges to their survival and
development a secondhand car dealer in
guango revealed to a blue whale
Financial reporter that the current
secondhand car market is sluggish taking
himself as an example he only sold a few
cars in May this year and a few more
than a dozen cars in June in comparison
he could sell dozens of cars a month
during the peak period with a net profit
of tens of thousands of dollars nowadays
many vehicles are sold at a flat price
and the listing price is the final price
in addition secondhand car dealers also
face the risk of extended inventory
turnover periods and declining capital
turnover rates data from the Automobile
Dealers Association shows that from
January to December 2022 the average
inventory cycle of the used card
industry is 37 days to 51 days the
average inventory cycle in the first
half of 2023 is 48 days to 57 days and
in the second half of the year it is 59
days to 61 days
in addition a survey in December last
year showed that 18.5% of used car
companies believe that their operating
conditions were not good and nearly 40%
of companies said that their capital
turnover rate had dropped by
10% car dealers are facing heavy losses
this year and one by one many collapsed
the car buying Market is very difficult
90% of Car Dealers are suffering serious
losses and their inability to make money
is becoming increasingly
serious for example when we collect
secondhand cars once the secondhand
vehicles have not been sold for a month
once the price of new cars drop the
secondhand cars will no longer be sold
however the new vehicles we told over
were challenging to sell as well and
there was a possibility of losing money
if they were not sold within a week why
because the price of new cars is
dropping every day if I drop it too much
I may not be able to protect my capital
and will end up selling it at a
loss China's used car market has
completely collapsed in 2 years this
industry may disappear do you know how
cheap used cars are now no one wants the
mercedesbenz S-Class bmw7 series and
Audi A8 which are over 15 years old and
costs over
$4,000 Maseratis cost more than $6,000
and are everywhere those old McLarens
and Lamborghinis cost around
$55,000 if your budget is a little
higher you can buy a Ferrari for 60
Grand some in poor condition only cost a
little over 40
Grand many used car dealers straight up
close their doors in this downward Trend
vehicle sales data suggests a hazardous
future that is the stock of secondhand
cars has been extremely high if used
cars can't be sold new vehicles
naturally won't Faire better and with
new cars still being produced
continuously the phenomenon of over
Supply will soon become apparent in the
automotive
industry neisens also pointed out that
as they live through the economic cycle
everyone's consumption has become more
and more rational and they have begun to
save more and more money it doesn't
matter how attractive a new car is say
for example a new car that costs a
little more than
$10,000 it will lose thousands of in
value immediately after you buy it but
if you don't change your vehicle and
continue to drive your old car you only
need to pay some maintenance and
insurance fees every year and the longer
you drive it the more cost effective it
will be at least it will save a lot of
money compared to buying a new car the
outside world has also noticed that due
to the intensifying price war in the
auto market many car dealers have been
forced to withdraw from the network shut
down or change brands since last year
the China Automobile Dealers Association
surveys show that more than 70% of
dealers failed to complete their annual
task targets with a loss ratio of
43.5% in 2023 about 1,500 to 2,000 car
dealers Nationwide will withdraw from
the network tongu Secretary General of
the national passenger car market
information joint Association said the
industry's destocking characteristics
were evident in June the structural
adjustment pressure is accelerating from
the OEM to the channel end and dealers
lack confidence in continued operations
the latest survey from the China
Automobile Dealers Association shows
that the Domestic Auto Dealer inventory
warning index reached 62.3% in June an
8.3 percentage Point increase
year-over-year this index is in the
recession Zone and was close to 65.3% in
November 2022 to this data reflects the
current inventory pressure and sales
difficulties the Chinese automobile
Market
faces in addition the latest data shows
that the share of foreign automakers in
the Chinese market is rapidly shrinking
and local brands have occupied most of
the market therefore foreign funded
companies have chosen to withdraw
Japan's Mitsubishi Motors announced in
October last year that it would stop
production at its joint venture in China
and transfer its shares to Chinese
Partners this was at the peak of the
price war in the Chinese automobile
Market in July 2022 Netherlands based
santis group closed its only Jeep
manufacturing plant in mainland China
citing increased local government
interference several foreign automakers
are tightening spending to cope with
declining sales in April Tesla said in
an internal memo that it would lay off
more than 10% of its employees globally
with employees in China also affected
high and Motors whose sales in China
have also been declining announced in
January this year that it would sell its
chonging Factory to a local company in
June this year Nisan announced it would
cease production at its Chango plant and
Honda planed to reduce the number of
employees at its joint venture in China
the wave of price Cuts has left many
dealers on thin ice A salesperson at a
Mercedes-Benz 4S store revealed that
many models are currently being sold at
a loss
for example the Mercedes-Benz C-Class
costs more than $99,000 for every unit
sold this business situation is
unsustainable the price war on luxury
cars has made it difficult for dealers
to survive but it has also failed to
increase s significantly the latest data
shows that BMW including mini delivered
375,000 vehicles in the Chinese market
in the first half of the year a
year-on-year decrease of 4.2%
Mercedes-Benz delivered a total of
352,000 cars in the first half of the
year a year-on-year decrease of about 6%
to help dealers cope with short-term
difficulties BMW officials have provided
subsidies to dealers and for S stores to
ease business pressure according to a
financial Associated Press report German
luxury car brands have experienced
Fierce price Wars and their dealers have
been badly hit in response to the
turbulent Market environment BMW China
shifted its focus to business quality
and officially exited the price War
subsequently luxury Brands such as
Mercedes-Benz and Audi also followed
suit notably the prices of Mercedes-Benz
and Audi are on a steady upward
trajectory a sales consultant at a
Mainland Mercedes-Benz 4S store has
confirmed that the current prices are
holding relatively steady with
expectations of moderate future
increases similarly an Audi dealer in
Beijing has also endorsed the price
adjustment policy with slight increases
in several main selling models industry
insiders believe that the reduce volume
and stabilize price sales strategy of
Mercedes-Benz BMW and Audi can provide
dealers with a more relaxed environment
while improving the quality of sales and
after Sal services to maintain the value
of luxury brands
[Music]
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