CHINA’S car market used to run like a high-revving engine. But after double-digit growth in much of the past decade, sales volumes have slowed dramatically. Barclays, a bank, recently revised its growth forecast for 2015 down from 8.5% to just 1.7%. Others think sales may even shrink. China’s car dealers, mostly newcomers to the business and over-reliant on selling new cars for their livelihoods, are struggling to cope.
Carmakers frantically expanded their networks when sales were booming, and now China has a surfeit of dealers. By the end of 2014 some 26,400 had set up, according to Sanford C. Bernstein, a research firm, 60% more than in America, even though China’s new-car sales are just 40% higher. Often, carmakers handed out franchises with little regard for the suitability of either the location or the dealers themselves. The German premium marques have done best at building an efficient network (see chart). But even their dealers are having to scrap among themselves for custom.
There has not yet been much consolidation of car retailing into larger chains of dealers. The 100 biggest dealership firms have just a fifth of total outlets;...
from The Economist: Business http://ift.tt/1PBEqKF
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