Loss about $700 on selling a vehicle; Second-hand dealers can't sell a single car a month.

Summary

The 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

00:00

🚗 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.

05:01

🏦 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.

10:05

📉 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.

15:05

🚘 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.

Keywords

💡Car dealership

A car dealership is a business that sells new or used cars at the retail level. In the video's context, it discusses the challenges faced by car dealerships due to intense competition and market saturation, as evidenced by the varying prices at which cars are being sold.

💡Market competition

Market competition refers to the rivalry among sellers of goods or services. The script mentions the fierce competition in the car market, where dealerships are selling cars at drastically different prices, affecting profitability and market stability.

💡Inventory

Inventory in a business context refers to the stock of goods that are available for sale but have not yet been sold. The video talks about the increasing inventory levels in the car industry, which is a sign of oversupply and a contributing factor to the price drops and sales difficulties.

💡Sales decline

Sales decline indicates a reduction in the number of units sold over a period. The script cites various statistics to illustrate the significant drop in car sales, affecting not only individual dealerships but also major automakers like SAIC Motor.

💡Economic recovery

Economic recovery is the period during which an economy returns to a state of growth after a decline. The video mentions China's sluggish economic recovery as a factor contributing to consumers' reluctance to spend, impacting the car market's performance.

💡Passenger car market

The passenger car market is the segment of the automotive industry that deals with cars designed for personal use. The script discusses the overall downturn in this market, with sales figures showing a consistent decline over several months.

💡Price war

A price war occurs when companies lower their prices to gain market share, often to the detriment of profit margins. The video describes a price war in the auto market, where dealerships are selling cars at a loss to try to move inventory.

💡Financial crisis

A financial crisis is a situation where financial assets experience a sudden and precipitous decline in value. The script refers to the financial crisis faced by certain car dealerships, leading to closures and a lack of confidence in the industry's future.

💡Used car market

The used car market involves the buying and selling of previously owned vehicles. The video highlights the struggles of the used car market, with high inventory and low sales volumes, contributing to the overall malaise in the automotive industry.

💡Luxury cars

Luxury cars are high-end vehicles that offer a higher level of comfort, features, and status. The script notes the impact of the market downturn on luxury car sales, with even prestigious brands like Mercedes-Benz, BMW, and Audi experiencing sales pressures and price adjustments.

💡Oversupply

Oversupply occurs when the quantity of a product available in the market exceeds the quantity demanded. The video discusses the oversupply issue in China's auto market, leading to a surplus of vehicles and contributing to the downward pressure on prices.

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]