Bumpy road ahead for car sales

 Dealers adapting to market challenges

By Du Juan

BEIJING - Auto dealers in Beijing are planning to improve services, expand to markets outside the capital and speed up secondhand trade as part of efforts to adapt to the limit on license plate registrations, China Daily has learned.

New regulations, which came into effect on Jan 1, will limit the number of vehicles sold in the city to 240,000 in 2011. Last year, dealers shipped 891,000 units.

"The number of people coming into the showroom has fallen sharply, maybe by as much as two-thirds," said Yan Tao, a sales consultant at Beijing CATC Zhongwang Automobile Sales and Services. "We haven't sold any cars yet this year."

The municipal government now requires all potential private buyers to apply for license plates before purchasing a vehicle. A total of 20,000 lucky applicants, either corporate or individuals, will be drawn every month in a lottery.

Yan sold 14 cars in December, although due to the serious challenges facing the market, he is among thousands of salesmen who could soon be laid off. He expects his company to release a detailed action plan after the Lunar New Year holidays. However, as Yan works for Volkswagen, which makes some of China's best-selling models, he is determined to stay upbeat.

"We're a big company, so the rule won't affect us as seriously as smaller ones," he said. "As for myself, I need to improve my overall performance to keep my job."

For Wang Lu, a salesman at a 4S store - sales, service, spare parts and survey - for domestic brand BYD, things are not looking so rosy.

"I seriously doubt people will continue to be interested in buying our cars when it's hard to buy the right car," he said. "When consumers have a choice, it's natural for them to consider better cars, such as foreign brands."

Jia Xinguang, an independent auto analyst in Beijing, said the situation offers the perfect opportunity for auto dealers to change their ways.

"There are many successful models in developed countries," he said. "The focus of dealers should be on after-sales service, instead of sales. Overseas, only 20 percent of profits come from new cars; in China its 60 percent. That needs to be changed."

Many Chinese companies are already establishing auto clubs and hold regular activities to attract customers, which is a positive trend, he said, adding: "It is important to keep after-sales customers, as they're more stable than potential buyers."

Some dealers are also considering launching car rental services to make up losses. However, Jia warned that the market is a complex field that requires even greater financial clout and management capabilities.

"Stepping into the car renting business just because of the new rule sounds risky," he said.

Jia said he believes there are still many opportunities for auto dealers, such as new-energy cars, secondhand cars and car maintenance. "They're all good ways to make profits," he added.

Chi Yifeng, general manager of Yayuncun Automobile Trade Market, the largest dealership in Beijing, said companies will now have to fiercely compete on price, service and quality to win customers.

"Even though it is a big challenge for us, we have confidence we will adapt smoothly and our market share will increase to 30 percent of total auto sales in Beijing," he said.

Yayuncun Market sold 160,000 cars in 2010, accounting for 20 percent of the capital's overall sales.

"Including owners who have license plates and want to trade in their cars, total car sales won't fall lower than 500,000 in 2011," predicted Chi.