An Overview of Automotive Dealer Market in China
Many friends and colleagues working in the automotive industry outside of China have shown great interests in the Chinese automotive retail market ever since the sales/production volume in China became the world largest in 2011. In 2013, the sales volume is 21.9 million units and analysts forecast that within the next 10 years, Chinese automotive retail market will keep growing at an annual rate of 10%. Thus here I would like to take the advantage of SCN to share with my buddies, from my personal perspective, an overview of Automotive Dealer Market in China.
Let us take a look at business data from Chinese public automotive website. In 2013, automotive retail in China has contributed 26% (that is 2888B RMB or 360B EUR) of the total retail business revenue, which is also the No.1 revenue generator in all retail sub-segments such as food, express, etc. And some key characteristics of the Chinese automotive retail market are:
- Consolidation of dealer outlets intensifies and mega-dealer groups are evolving into giants with revenue size similar to top OEM in China. E.g., in 2013 the revenue of the No.1 dealer group in China amounts to 84B RMB or 10B EUR. There are 31 dealer groups whose revenue amounts to 10B RMB and among these 5 amounts to 50B RMB.
- New car sales revenue is still the key source (>80%) of revenue within the vehicle sales, service, parts business, leasing and all other business a dealer store runs.
- Vehicle service becomes profitability generator. It contributes to more than 50% of dealer’s profitability, which is more than vehicle sales contribution.
- Vehicle loan service has gain more attention from consumer. 22% of consumers will use loan service when buying a vehicle. In 2009, this number is 9%.
And observations also show that the Chinese automotive retail market is facing big transformation challenges because:
- Consumers tend to move to online business (on Nov. 11th 2014, the total online transaction volume within this single day amounts to 6B RMB via just one Chinese biggest automotive community Autohome, YoY growth rate 140%), which brings hot discussions about O2O automotive retail business and most of the brands start to investigate and invest in this new business channel with no pilot to follow or refer to in the world.
- The gross profitability of all dealers is on average 3-7% of its total revenue (according to published finance result of the dealers who are already in stock market), which also forces the traditional business to seek new business model such as O2O, e-Commerce to survive and grow.
- The group company of those dealers has limited visibilities of their daily business due to lack of support from technology and thus cannot leverage the real-time business data to derive insights and make decisions according to the fluctuating business.
Many of us believe China is a huge automotive retail market and wants to penetrate this market or become the market leader in this country and worldwide. We see the market potential, we are aware of the pains and we forecast the trends, what to do next? Execution plans?
As a key player in the software world, SAP is working hand-in-hand with leading dealer groups in China and Europe to develop, implement and continuously improve our end-to-end solution for the automotive retail business, covering business applications of planning, financial controlling, marketing, sales and aftersales service, renting, leasing, as well as business analytics, user experience, in-memory technology, big data and onPremise or Cloud deployment. And we are open to discussions and further investigations in this amazing business segment of the automotive industry.