The number of dealership groups in the so-called "10-billion-yuan club" rose to 21 last year. [Photo/ China Daily]

Consolidation, moves inland as the overall market cools

The number of domestic automobile dealer groups with revenue of above 10 billion yuan ($1.6 billion) rose quickly last year, an indication of further consolidation in the industry, according to a report released by Automobile Dealers Association last week.

A total of 21 auto dealers each had revenue surpassing 10 billion yuan last year, the report showed, a sharp increase over the 13 in 2010 and 11 in 2009.

Combined revenue for the so-called "10-billion-yuan club" last year exceeded 500 billion yuan, a year-on-year surge of 59 percent over 2010, and about 60 percent of the total was from the top 100 dealers selected by the association in terms of revenue.

Their combined sales and net profit grew by 30 percent and 61 percent over the previous year, both far above the industry average, the association said.

"Enhanced concentration is the most remarkable feature of China's automobile distribution sector last year," said Shen Jinjun, deputy chairman and secretary-general of the association.

For the first time China Grand Auto became the biggest domestic auto dealer with revenue of about 64 billion yuan last year.

Former No 1 domestic auto dealer Shanghai-listed Pang Da Automobile Trade Co fell to second place with revenue of 55 billion yuan, while Sinomach Automobile Co Ltd broke the 50-billion-yuan benchmark for the first time to claim the third spot.

Top three

The three were the only auto dealer groups in China with revenues above 50 billion yuan last year, the report showed.

The fourth to twenty-first ranked distributors had revenues ranging from 10 billion to 47 billion yuan, with the rest registering revenues below 10 billion yuan.

The statistics meet the government's call for more consolidation in the automobile distribution industry.

A guideline issued by the Ministry of Commerce last December set a 2015 target of three to five large dealerships with revenues over 100 billion yuan and 30 regional dealers with revenues surpassing 10 billion yuan.

The ADA report also showed that domestic auto dealers are expanding to mid-sized and small cities.

It said outlets in first-tier cities - Beijing, Shanghai, Guangzhou and Shenzhen - accounted for about 21 percent of all shops across the country in 2010, but the proportion fell to 15 percent last year.

According to the association, the top 100 auto dealers had a total of 5,665 outlets in the country last year, up 82 percent from the number in 2010. Among all the outlets, the number of authorized 4S shop with comprehensive operations in sales, spare parts, service and survey increased 27 percent to nearly 4,000.

Slower expansion

But the leading dealers actually began to slow their expansion in the wake of a cooling auto market.

Pang Da last year set up only 264 4S dealerships, far fewer than its previous for 400.

The company said that it plans to continue the slowed pace this year and only open 150 to 200 new 4S shops.

Grand Auto is taking a similar approach. Its president and CEO Wang Zhen said that the company's focus this year is improved management even if it has to give up some expansion opportunities.

The report also showed that vehicle sales accounted for the vast majority of the revenue - some 88 percent - for the top 100 dealers last year.

Only 7 percent of their income came through repairs and maintenance, and 4 percent from auto financing and insurance.

Analysts said the results show there is still a long road ahead for China's auto dealers to change their business structure, but as the overall market slows, it has become more urgent for them to make the change.

In mature markets such as Europe and the US, auto dealers usually generate more revenues from after-sale services and financing than from vehicle sales.

hantianyang@chinadaily.com.cn