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Cars, been consumer durables, are pretty sensitive to economic conditions and even more so for the Chinese, whom are above-norm savers by global standards.
Match the demand reduction with an abundance of supply and what Trans China Automotive, a car dealer gets, is negative gross profit for 2H23. Basically, at the end of the year, it has to throw out discounts and sell below cost to meet the quota from its brand principals.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS AND FULL YEAR ENDED 31 DECEMBER 2023
The overall Chinese economy grew by 5.2% in 20231 . Despite the headline growth, consumer sentiment is plagued by deflating property market, weak exports growth and continued geopolitical tensions with its major trading partners. The Chinese car market was a bright spot in a weak economy which saw volume grow by 5.6% to 21.7 million units, led by growth in new energy vehicles2 .
The industry is currently in an intensely competitive phase. In early 2023, leading EV brands began to aggressively discount their cars which ignited a price war. The result was that most of brands had match price cuts to attract customers. This has affected all market participants including car dealership groups. All of the large Hong Kong listed dealer groups reported first half 2023 profit declines primarily as a result of new car gross margin erosion. Meanwhile, some EV brands that have not reached sustainable volume have shut down. The government is also looking to introduce measures to reduce capacity in the industry. However, despite these developments, it is unclear when the difficult competitive conditions will subside.
https://links.sgx.com/FileOpen/TCA-FY202...eID=789963
Match the demand reduction with an abundance of supply and what Trans China Automotive, a car dealer gets, is negative gross profit for 2H23. Basically, at the end of the year, it has to throw out discounts and sell below cost to meet the quota from its brand principals.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS AND FULL YEAR ENDED 31 DECEMBER 2023
The overall Chinese economy grew by 5.2% in 20231 . Despite the headline growth, consumer sentiment is plagued by deflating property market, weak exports growth and continued geopolitical tensions with its major trading partners. The Chinese car market was a bright spot in a weak economy which saw volume grow by 5.6% to 21.7 million units, led by growth in new energy vehicles2 .
The industry is currently in an intensely competitive phase. In early 2023, leading EV brands began to aggressively discount their cars which ignited a price war. The result was that most of brands had match price cuts to attract customers. This has affected all market participants including car dealership groups. All of the large Hong Kong listed dealer groups reported first half 2023 profit declines primarily as a result of new car gross margin erosion. Meanwhile, some EV brands that have not reached sustainable volume have shut down. The government is also looking to introduce measures to reduce capacity in the industry. However, despite these developments, it is unclear when the difficult competitive conditions will subside.
https://links.sgx.com/FileOpen/TCA-FY202...eID=789963