China auto association flags concern over dealership losses to government

BEIJING (Reuters) – Car dealers incurred combined losses of 138 billion yuan ($19.55 billion) in the first eight months of the year as they were forced to sell new cars at sizable discounts, the China Automobile Dealers Association (CADA) said on Monday.

The losses were flagged in an emergency report on the financial difficulties and shutdown risks facing dealerships amid a price war in the world’s largest auto market, which was recently submitted by CADA to relevant government authorities.

Dealer inventories remain high amid sluggish consumption, forcing them to sell at low prices, the association said in a statement on its WeChat account.

The overall discount rate for new cars stood at 17.4% in August, CADA data showed.

The collapse of both regional and national domestic dealerships has mostly been due to “capital chain rupture” rather than their own operations, according to CADA.

Money-losing China Grand Automotive Services, the country’s second-largest dealership, was delisted from the Shanghai bourse in August after its stock traded below par value for 20 consecutive days.

CADA is calling for a ramp-up in financial support for private dealerships, which make up a big part of the so-called automobile circulation industry.

Car sales in China fell in August for the fifth straight month, though sales of all-electric and plug-in hybrid models rose, helped by subsidies for drivers trading in more polluting vehicles.

($1 = 7.0577 Chinese yuan renminbi)