Car Dealers in China Face Major Losses

BEIJING (Reuters) – Car dealers incurred combined losses of 138 billion yuan ($19.55 billion) in the first eight months of the year due to substantial discounts on new cars, as reported by the China Automobile Dealers Association (CADA) on Monday.

The losses were detailed in an emergency report highlighting the financial challenges and shutdown risks for dealerships amid a price war in the world’s largest auto market, recently submitted to government authorities by CADA.

High dealer inventories, driven by sluggish consumption, have pushed them to sell at low prices, according to a statement on CADA’s WeChat account. The overall discount rate for new cars reached 17.4% in August, according to data from CADA.

CADA noted that many regional and national domestic dealerships have collapsed primarily due to capital chain rupture, rather than operational issues.

China Grand Automotive Services, the second-largest dealership in the country, was delisted from the Shanghai stock exchange in August after trading below par value for 20 consecutive days.

CADA is advocating for increased financial support for private dealerships, which are a significant component of the automobile circulation industry.

In August, car sales in China fell for the fifth consecutive month, although sales of all-electric and plug-in hybrid models increased, aided by subsidies for drivers trading in more polluting vehicles.

($1 = 7.0577 Chinese yuan renminbi)