BYD dealerships failing show pain in China car sector

BEIJING: Car dealership groups in two provinces have gone out of business since last month in China, both of them BYD Co. retailers.

It is evidence of the tough competition in the nation's auto market and proof that not even selling the country's No. 1 brand can shield businesses from financial difficulties.

Xingqi Group outlets in Liaoning province have stopped delivering new cars or providing service for more than 60 customers, according to Liaoning Radio and Television Station.

Meanwhile, more than 500 people have formed online consumer rights groups to demand action from Qiancheng Holdings, which operated about 20 showrooms in Shandong province.

Its stores also appear to have now closed, Chinese media outlet Autodealer reported May 6.

Car dealerships in China are facing a profound shift brought about by the transition to electric vehicles and a slowdown in consumer spending that's left yards stuffed with stock.

Most EV manufacturers now have a direct-to-consumer model, while the reduced servicing required by EVs and hybrids is also hitting dealerships' bottom lines.

Stock levels in April reached 3.5 million cars, or 57 inventory days, the highest since December 2023, according to data shared earlier this week by Cui Dongshu, the secretary general for the China Passenger Car Association.

Qiancheng Holdings said that adjustments in BYD's dealer policy over the past two years has put tremendous pressure on its cash flow.

And due to other dealerships in Shandong province going under, local banks have tightened lending, adding to the pain, it said in an April 17 letter circulating on social media.

Calls to Qiancheng Holdings and Xingqi Group weren't answered. Representatives for BYD didn't respond to requests for comment.

One customer based in Jinan, the capital city of Shandong, told Bloomberg that she purchased a BYD Seagull hatchback at one of Qiancheng's stores last June.

The dealer gave her lifetime servicing and also sold her an insurance package for 10,500 yuan ($1,500).

When she went back to the showroom earlier this year to renew her insurance, she found it had shut.

She called BYD's official hotline but wasn't offered any solution, she said, declining to be identified for privacy reasons.

Many BYD dealerships have excess stock after the company launched a new advanced driver assistance technology called God's Eye in February that will be installed in most of its models.

That meant BYD dealers had to get rid of older stock quickly.

Inventory levels at its outlets were the third highest of all brands in January, according to a China Automobile Dealers Association analysis.

Under pressure to sell the cars, many dealerships resorted to slashing prices by thousands of yuan.