Editor's note: In the context of the domestic auto market's opposition to involution, many OEMs have promised to unify the payment period for suppliers to within 60 days. On the distribution channel side, thousands of dealers are under increasing inventory pressure, and many are suffering, and even on the verge of a capital chain break. Recently, the author communicated with some dealers about the inventory situation and received a lot of news from the front line.
Recently, "Automobile News Agency" interviewed Tang Guohua, chairman of Hunan's largest dealer group Lantian Group, to share his observations on the distribution channels of the auto market: in the process of coordinating the wholesale sales rhythm of the OEMs with the market digestion rhythm, some dealers are facing operating pressure. According to his judgment, 80% of dealers in the industry may face losses, and in the second half of the market environment, it is expected that about one-third of dealers may adjust their business layout or exit the market due to capital turnover pressure.
According to feedback from terminals, facing the crisis of rising inventory, dealers in some areas have reached a consensus that if the market situation does not improve, starting from July they will no longer pick up cars from manufacturers, but purchase from other provinces with "low prices" until they no longer renew the agreement and directly withdraw from the network.
Regarding the reasons for high inventory, many dealers believe: "The root cause is that the OEMs blindly expanded production and increased volume, resulting in intensive store construction, inventory pressure, distorted terminal prices, and many dealers running away due to capital chain breaks." From this point of view, de-capacity, squeezing out bubbles in production capacity, maintaining a reasonable wholesale volume, and allowing market prices to return to rationality are solutions to reducing inventory and improving channel operations.
The inventory factor of some brands exceeds 5
As the largest automobile dealer group in Hunan Province, Lantian Group has obtained authorization qualifications for 22 automobile brands and has 81 brand 4S stores in and outside the province. Tang Guohua, chairman of the group, revealed in an interview that the group's sales in May reached more than 8,000 units, and sales in June are expected to be around 5,000 units, a month-on-month decrease of about 60%. He pointed out that the current market price competition has intensified, and some brands have been affected by the national new energy vehicle subsidy policy, with a price reduction of 20,000 to 30,000 yuan for a single model, which has an impact on terminal market sales. The above judgment reflects the current stage challenges faced by the automobile circulation field in terms of production and sales coordination and inventory management.
The author learned from other dealers that among all car brands, SAIC Volkswagen's wholesale management is relatively reasonable. It is understood that when the inventory coefficient of SAIC Volkswagen dealers reaches 1.6, the OEM will no longer wholesale to the dealers; or when the local market share remains stable and the inventory coefficient is above 1.5, the OEM will no longer wholesale vehicles.
The head of a domestic dealer group told the author that brands with relatively good operations include new car-making forces, Hongmeng Intelligent Driving series and SAIC Volkswagen, and their inventories are within a safe range; while the inventories of some other brands are very high.
Taking a fourth-tier city in China as an example, the inventory of many local domestic brands remains high, including:
BYD: The inventory coefficient is higher than 6, even as high as about 10. If each local store sells 50 vehicles per month, the inventory of a store is more than 500 vehicles.
Hongqi Automobile: The inventory coefficient is about 4-5; based on the calculation that each store sells 90 units per month, a store needs to prepare about 15 million yuan in funds each month, and the financial pressure is obvious.
Geely (fuel vehicle series): inventory coefficient 3-5; the monthly wholesale volume is 60-80 units.
Overtaking vehicles is like "drinking poison to quench thirst"
"For all dealers, the increasing inventory is the 'root of the problem'. Many dealers are tempted by the 'small favors' from the OEMs and are forced to pick up vehicles, including 'diving bonuses' and 'extra-long bonuses'. I believe that for healthy operations, dealers cannot pick up excessive vehicles." The person in charge of a dealer admitted.
Taking one of the above-mentioned dealer groups as an example, the FAW-Volkswagen, Hongqi and other brands under the group were forced to offer substantial discounts in order to maintain basic sales. For models priced between 160,000 and 180,000 yuan, the dealers' own discounts were as high as 70,000 yuan. After deducting the manufacturer's rebate, the dealers suffered a loss of 40,000 to 50,000 yuan per car.
The group's total monthly vehicle delivery volume is about 5,000 units. In order to get rebates from manufacturers, the number of vehicles shipped out of warehouses reaches 200-300 units per month, which puts great financial pressure on the group. In the past, financial derivative businesses such as ultra-long loans were profitable, but this year, profits in this area have shrunk dramatically.
Tang Guohua introduced in the interview that the market performance of different brands under Lantian Group showed differentiated characteristics. "From the perspective of Lantian Group's terminal sales, the market performance of brands such as Dongfeng Nissan, Dongfeng Honda, SAIC Volkswagen, FAW Volkswagen, GAC Aion and Hongqi Automobile is relatively outstanding." He further explained that the annual sales of Dongfeng Nissan stores under the group remained stable at more than 20,000 units when the annual sales of the main engine factory dropped from one million units to 600,000 units. The annual sales of Dongfeng Honda's six stores were nearly 10,000 units, and this sales scale has been maintained for many years. The full channel contribution within the brand has remained at around 3%; the annual sales of brands such as SAIC Volkswagen and FAW Volkswagen are also increasing. Among them, the sales of the Hongqi brand last year were nearly 4,000 units, and this year it is expected to increase to around 6,000 units.
Data shows that by optimizing management processes, the inventory coefficient of most brand stores of Lan Tian Group is controlled within 2.0 or even 1.5, demonstrating strong operational efficiency.
For the aforementioned group, the bank's credit line is about 200 million yuan, and the monthly loan required is about 60 million yuan. Once the inventory pressure is serious, the funds will be stretched.
postscript:
The inventory pressure of dealers such as Lantian Group is just a microcosm of the current situation of Chinese auto dealers. For Chinese cars, it is very important to maintain the healthy development of distribution channels. Dealerships are not only the task units to complete tens of millions of sales each year, but also important promotion units and marketing carriers for China's automobiles to move towards intelligence and electrification and become a new energy vehicle power. The importance of its healthy operation is self-evident and deserves the attention of the entire industry.
(Original title: "Tang Guohua, Chairman of Lantian Group: One-third of domestic dealers may adjust their business layout or exit the market due to financial pressure in the second half of the year")