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Chinese Automobile Industry Under High Downward Pressure

Currently, China’s main strategy to boost its economy is to increase domestic consumption, with housing and automobiles being the two main drivers. However, a recent report on the well-known Chinese news site Sina painted a dismal picture of the country’s auto industry.

The report covered the newly published 2023 ranking of China’s Top 100 Auto Dealer Groups. It also included a 2022 report pointing out that China’s auto market is facing big changes. Auto dealer groups are facing the pressure of both transformation and the impact of channel changes. The 2022 report shows that the dealers’ annual profitability was disappointing due to factors including COVID, the decline in demand for transportation, loss of talent, and increased customer acquisition costs. Among all dealers, only 29.7 percent made a profit. This was almost half of the number when compared with the 53.8 percent which profited in 2021. Dealers suffering losses accounted for 45.2 percent, an increase of 27.7 percentage points compared to 2021. Only 25 percent of dealers broke even and three percent suffered a decrease when compared to a year ago. According to the 2022 financial report, out of 11 publicly listed dealer groups, only three have achieved a positive growth in revenue, only two had a positive growth in profit, and only one had both revenue and net profit growth. The downward pressure on the auto market is still great, and the signs of recovery have not yet appeared. Sluggish consumer spending has been the biggest sourced of downward pressure in the auto market. As for new energy automobiles, although the market size continues to grow, most new energy car companies are selling at a loss.

Source: Sina, May 29, 2023