China: Toyota dealer group claims losses lead to defection image

According to a dealer’s association, as many as 10% of the dealers that work for one of Toyota’s Chinese joint ventures are ready to quit the network because they constantly loose money on the cars they are supposed to sell.

Song Tao, a deputy secretary of the China Automobile Dealers Association, claims that within the FAW-Toyota Motor Sales Co. group, 95% of the 523 distributors have not made a profit. Due to the ongoing losses, some of the dealers are now forced to end the association with FAW-Toyota or even shut down the business altogether. The defections come to add pressure just as the state-backed dealer’s group has already asked FAW-Toyota in a letter to support the dealers with subsidies worth 2.2 billion yuan ($353 million), the money being used to mitigate the costs triggered by excess inventory.

According to figures from the dealers association, the economy slowdown and the lower sales growth in recent months has caused unsold vehicles on dealer lots from all brands to rise to the highest level in November since August 2013. The latest FAW-Toyota dealer complaints join a similar pledge coming from distributors that work for BMW and signal the rapid push of China’s auto retailers that seek enhanced autonomy from automakers, as the latter today tell them what models and in what quantities to sell.

Via Bloomberg