The Chinese dealers have started to complain to the government that automakers held on to inflexible sales targets that forced them to take on excess inventory and book losses.
The foreign companies held on to their 2014 sales targets that were set during the early-year boom even as demand cooled down significantly during the latter part of 2014 and now the dealers are growing weary of the sales targets that remained unchanged, obliged to purchase too much stock and then bear the losses. Carmakers opted to stick to their 2014 sales targets and sold the cars to the dealers on schedule, though the latter were forced to drop retail prices and incur losses as the pace of the world’s largest auto market slowed down by 50% from 2013’s increase of 14%.
Now, as the dealers and their associations have started to complain and threaten to desert the sales networks, foreign makers might struggle in the near future to dictate as usual the sales goals. “Carmakers have high market expectations. But the reality is: supply exceeds demand,” commented Luo Lei, deputy secretary general of the China Automobile Dealers Association (CADA). The report sent to the authorities by China’s largest dealer group might change the balance of power, just when automakers are beginning to rethink their China strategy as the country has seen the economic growth at the lowest level in 24 years.