Many Chinese Auto Dealerships May Close by Year End

Shanghai, June 23, 2007; (Gasgoo.com) The sharp slide of the auto market and the mounting stockpile of vehicles in the past two months have put China's car dealerships in great difficulty. A recent survey by a market research firm predicts that a large number of auto dealerships will be closed by the end of 2008.

"Dealers of our brand have closed their stores," said a Shanghai VW dealership manager, who is now falling back on his years of car repair expertise for his store to sustain its business. Most managers of big-name car brands have experienced the same market depression, which has left large supplies of vehicles piling up in their courtyards. On the other hand, banks are controlling credit loans more strictly and the auto dealers are unlikely to get any timely cash flow.

At the beginning of this year, all Chinese carmakers set their ambitious sales targets for 2008. But unexpectedly, the snowstorms in South China in late January to early February delivered a heavy blow to the country's auto market, and the impact is immediately compounded by the soaring fuel prices, falling stock market, devastating Sichuan earthquake, and loan austerity in the months that followed. All these have made it difficult for most carmakers in China to achieve their sales goals this year.

Auto dealers in the country are expecting a severely cold winter in 2008, with many of them to close their stores, if the mounting stockpile of vehicles in the stores' backyards can not be sold more quickly in the second half of this year. To weather the tough time, quite a few dealers have plans to diversify their businesses such as setting up 4S stores and other services.

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