Recently, China Automobile Dealers Association (CADA) released data that VIA (Vehicle Inventory Alert Index) reached 57.9% in April, 2016, higher than alert level, and it’s the consecutive 8th month of VIA higher than 50%.

 

Declining Profits in 2015

 

2015 Annual Report for Some Listed Auto Dealer Groups published by CADA analyzes 15 main listed auto dealer groups on operation status, profit structure and profitability. Report reveals that 6 of the 15 groups have increasing revenues in 2015, while others are declining. The total revenues are 43.98b RMB, declining 5.32% with 2014. Apart from Yaxia Auto, Pangda Auto, and China Grand Auto, others have declining net profits compared with 2014, with some declines reaching 50%.

 

Analysts believe that the declining performance is mainly resulted by sliding profits for new vehicles. The total new vehicle sales volume for above companies is 1,940,000 units in 2015, increasing 2.05%. But low market demand brings a declining sales revenue of 38.92b RMB. Besides, the gross profit rate also decreases 0.55 percentage points, and the average comes of 3.26%. Gross profit for each vehicle reaches 8,800 RMB in 2015, decreasing 27.86%. CADA analyzes that the ever competitive market will bring high marketing costs, sales costs and financial costs, further declining new vehicle’s real profit rate.

 

Increasing Profit Contribution for new Businesses

 

The new vehicle market change forces the industry to pay attention on services and actively explore new models, conduct new businesses and seek new profit growing points.

 

Data reveals that the total after-sales revenue for above companies reaches 42.9b RMB, increasing 6.75%. Harmony Auto, Meidong Auto, Rundong Auto and Yongda Auto have growth rates higher than 15%. The average after-sales revenue contribution is 9.75% during the report period, increasing 1.1 percentage points.

 

It’s noticeable that insurance, warranty extension and other auto financial businesses are new profit growth points for listed auto dealer groups. The total auto financial revenue reaches 6b RMB for above companies in 2015, increasing 3.31%, and Yaxia Auto, Yongda Auto, China Grand Auto, Zhongsheng Auto, and Harmony Auto have growth rates high than 20%.

 

The groups are also exploring auto financial leasing and operation leasing businesses. Besides, alternative energy vehicles, second-hand vehicles and parallel imported vehicles are also growing fast and have attracted many auto dealers.