By on May 22, 2010

In January, the Chinese government had warned its (mostly government-owned) car companies to go easy on capacity expansion. Car sales in China were expected to show more sedate numbers than last year’s torrid growth rate of 45 percent. Sales did not follow government orders. In the first four months of 2010, Chinese car sales grew 60.51 percent. Now finally, the government can say “we told you so.” China’s car dealers sit on a mountain of unsold cars.

Case in point: Brilliance. The Chinese auto maker “has started to face oversupply problems,” says Gasgoo, “with some of its dealers seeing inventories rising in excess of one-and-a-half months.”

To clear the inventory, Brilliance employs the expected: Discounts, combined with higher sales targets for their dealers.

Brilliance can find dubious solace in the fact that they are not suffering alone. “The oversupply problem with Brilliance Auto is just a reflection of an issue dogging the entire sector within the country,” says Gasgoo. During the first four months of the year, 6.17m units were moved. However, by end of April, car makers and dealers found themselves sitting on a pile of one million unsold  units, reported state news agency Xinhua.

China’s car makers find themselves in a quandary. If they don’t make enough cars, they lose market share. If they don’t sell enough cars, they lose their shirts. The mountain of unsold cars grows while capacity is added. Something will give, and it’s most likely smaller makers like Brilliance.

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7 Comments on “China’s New Car Pile-Up...”

  • avatar

    What will eventually give is the fact that most car sales are to corrupt government officials.

    They can only steal from the ‘People’ so long.

    • 0 avatar

      Citation needed.

    • 0 avatar

      Sometimes I get this idea that some people just post the most random stuff in Chinese car threads, making blankets statements that have little to no evidence to support them.

    • 0 avatar

      Oh please.

      What citation shall I print? How a good percentage of the Three Rivers relo money has been ‘misappropriated’ by government officials? (According to ‘The Party’.)

      How the average ChiCom official is spending more than his salary on his car and mistress (according to The Party)?

      How there’s such a thing as ‘billionaires’ in the ‘worker’s paradise’?


      I have an IQ over 150. I can read and know people who do biz in the PRC.

      Spew all the disinfo you want; the real truth of the turn-of the-20th-century-labor-conditions in Chine are known to the cognoscenti in the US.

      Anyone with 20 functional IQ points and access to Google knows better. (‘Course, the average denizen of the PRC doesn’t have free access to Google…)

      I understand you are making money from the yellow-slave conditions in China.

      Doesn’t mean I don’t have the balls to call you on it.

      Someone has to.

  • avatar

    1M cars in inventory really should be no cause for concern — that’s only 20 days’ worth of sales. In the US 60 days of inventory is considered to be normal.

    However, if the Chinese dealers are used to selling the cars the next day after they arrive, then it will certainly be a big shock to them. For the consumers, it should allow increased choice (of colours and equipment in stock) and some availability of discounts from the dealers.

    Bertel, have you ever done any stories on the retail part of the business in China? I’m curious as to how that works in China, compared to the Western countries.

    • 0 avatar

      I haven’t done much writing on the retail end in China, but it’s not much unlike the system in Europe or the US (without the franchise law protections.) Full service (there known as 4S) dealers have exclusivity agreements with manufacturers, must incorporate their CI, buy their parts, etc. The individual dealerships are more and more owned by larger chains. Sound familiar?

      Most dealership chains are in private hands, but some are somehow related to the government. Two for instances: For years, VWs in China were distributed through dealers owned by the Chinese army. Most likely, there are some remnants. The Chinese army can and does engage in enterprises. The largest dealer group in Beijing has its roots in the repair shop of the Beijing bus company, that is owned by the city of Beijing.

  • avatar

    That picture is great.

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