HONG KONG – A Chinese car dealership that operated as many as 80 stores across the southern province of Guangdong went bankrupt last week, in a sign the intense competition that has roiled the world’s biggest auto market may extend into another year.
Salespeople from Guangdong Yongao Investment Group notified customers on Jan 17 that the company had collapsed and orders are suspended, while employees are waiting to be paid outstanding wages, Chinese media outlets including the National Business Daily (NBD) reported.
The dealership sold about half a dozen marques, including Honda, Volvo and Guangzhou Automobile Group’s electric vehicle brand Aion.
Photos shared on social media showed about 20 yellow tow trucks set to be dispatched on Jan 17, with users saying these had been sent by banks to repossess vehicles.
Yongao’s ordeal shows how dealers are being squeezed on multiple fronts. High sales targets set by automakers are pressuring them to get cars out the door, while a slowing Chinese economy has seen many customers delay purchases in the hope of deeper discounts.
Just over a third of the country’s car distributors were able to achieve their sales targets in 2023, according to the China Automobile Dealer Association.
Yongao said on Jan 19 that three years of Covid-19 curbs, changes in the auto market and insufficient risk controls had tipped it into a crisis, NetEase News reported, citing a statement.
The company has set up a management task force and will try to ensure car deliveries to customers, as well as pay outstanding wages. Some dealerships are closed and some vehicles have been moved as part of a contingency plan, according to the report.
There were signs of distress at Yongao as early as April 2023, when employees lodged complaints with the Dongguan government about the company withholding wages, NBD reported.
China’s passenger car sales have stagnated since 2017, when they hit a peak of 24 million vehicles. Deliveries for 2023 came to 21.7 million, according to the China Automotive Technology and Research Centre.
Yongao customers have been left with little information about what is going to happen to their cars.
Mr Tan, who lives in the city of Dongguan and asked to be identified by only his surname due to privacy concerns, said he has not been contacted beyond a notification on Jan 17 that Yongao has gone bankrupt and the paperwork for his car will be suspended.
He bought a Lynk & Co 03 sedan in December but has been chasing the dealership for weeks to finish the registration paperwork and pay a 14,000 yuan (S$2,640) vehicle purchase tax. This has complicated plans to drive back to his home town for Chinese New Year in February, and he now needs to renew the temporary licence plate expiring on Jan 28 to keep the car on the road.
He said he has been told to wait and see what possible government intervention can achieve.
“I feel angry and helpless,” he told Bloomberg News.
State broadcaster CCTV reported on Jan 19 that the Dongguan government has set up and dispatched a task force to Yongao’s offices to collect information. It will also follow up on the status of vehicle deliveries and prioritise protecting the rights of consumers who have fully paid for their cars. BLOOMBERG
