Caixin
Feb 04, 2020 07:57 PM
BUSINESS & TECH

Hyundai and Volvo Offer China’s Stressed Dealerships Some Breathing Room

Last year, sales fell 8.2%, leaving some dealerships in dire financial straits just as the coronavirus outbreak has hit. Photo: VCG
Last year, sales fell 8.2%, leaving some dealerships in dire financial straits just as the coronavirus outbreak has hit. Photo: VCG
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Auto brands including Hyundai and Volvo are offering dealerships in China some financial assistance as domestic car sales are expected to plummet this month due to the coronavirus outbreak.

Hyundai Motor Co.’s Chinese joint venture will scrap its February sales targets and allow dealers to submit orders based on actual demand, Caixin has learned. The automaker is also planning to subsidize dealers’ interest payments on capital investments and is in talks with third-party financial institutions to deal with the expiration of the dealers’ bills of exchange. Both are measures aimed at taking some of the financial pressure off dealerships.

Swedish automaker Volvo AB announced on its website Sunday that no sales goals would be given to Chinese dealerships in February, citing diminished traffic at dealerships and the difficulty of delivering orders. To help dampen the outbreak’s impact on the car market, Volvo plans to hand out more than 10 million yuan ($1.42 million) worth of subsidies to its dealers and employees. It has also proposed negotiating with banks on behalf of some dealerships to reduce their risk of default.

The brands’ measures highlight the financial difficulties of a Chinese auto industry that has been struggling with shrinking sales since July 2018. Last year, sales fell 8.2%, leaving some dealerships in dire financial straits just as the coronavirus outbreak has hit.

The coronavirus outbreak, which has delayed resumption of manufacturing in many cities after the Lunar New Year holiday, could further drag down sales and add to operational pressure. Manufacturing hubs including Guangdong, Henan and Zhejiang provinces, as well as Shanghai, have extended the holiday by one week to Feb. 10, while Central China’s Hubei province, the epicenter of the outbreak and home to the manufacturing units of some automakers, is facing an indefinite shutdown.

Essence Securities Co. Ltd. said in a report that the current outbreak would hurt dealerships’ businesses as February is usually the time they stock up on new vehicles. Other securities firms compared the current situation with the car market during the 2003 SARS outbreak, and predicted the coronavirus epidemic could dampen sales for as long as the first six months of the year.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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