Dealers’ profitability suffers from inventory
March 6, 2017 Category Automotive, Weekly
Despite the vastness of China’s car market, the percentage of dealers who believe they will be profitable this year has fallen to less than half of last year’s figure due to inventory concerns. A survey of more than 1,400 dealerships shows that only 17% think they will be profitable this year, while 77% believe they will make ends meet, and 6% say they will lose money. Last year, 34.2% were profitable, 50.4% made ends meet and 15.4% were in the red. The survey, conducted by the China Automobile Dealers Association (CADA), covered dealerships that sell cars from seven premium brands, 27 international volume car brands and 36 Chinese brands. Dealers had a good year in 2016 thanks to a sales surge resulting from China’s 50% tax discount for cars with engines no larger than 1.6 liters and reasonable inventory levels, said Lang Xuehong, CADA Deputy Secretary General. The Association’s statistics show that last year, more than 86% of dealerships had “acceptable” inventory levels – meaning less than 1.5 times their monthly sales – nearly four times the percentage in 2015, the China Daily reports. The inventory index, which hit a 14-month high last month at 61.5%, continued its climb to 66.6% in February, according to CADA, while a reasonable level should be no higher than 50%.
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