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Dealers suffer over 20% profit declines amid inventory pressure

Source: National Business Daily | Date: Oct. 13

  • In Sept., China's inventory index stood at 55.7%, up seven percentage points from Aug., data from the China Automobile Dealers Association indicates. Since Oct. 2014, the inventory index has stoodthe alert level for 11 months. Although dealers' efforts to clear inventories have started to show results, inventory pressure remains high.

  • Amid an industry-slowdown, outlook for dealers' profitability has gone from bad to worse. In the first half of the year, listed dealer groups expanded at a slower pace, with 14 reporting an average decline of 21.77% in their net profits. According to the China Association of Automobile Manufacturers, 70% of dealers suffered a loss in the first half of the year, triggering an M&A wave. Amid softening demand, auto dealers are going through tough times, with the industry's landscape expected to be reshaped.

  • Driven by favorable policies, China's auto sales are expected to jump sharply in Oct., thereby easing dealers' intense inventory pressure.