Back to basics, and beyond: automakers seek to counter China slowdown

Thu Sep 17, 2015 5:10pm EDT
 
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By Jake Spring

XI'AN, China (Reuters) - As China's economy loses pace and car sales flatline, automakers are having to redouble their efforts to squeeze every dollar from their dealerships - beefing up after-sales and financing services that are a staple in more developed markets.

New car sales still make up a "ridiculous" 70 percent or more of dealer revenue in China, compared to as little as 5 percent in a market like Britain, where dealers make most of their money from car repairs, insurance and auto finance, said an executive at a chain of luxury dealerships in China.

For years, Chinese car makers and their dealers had it easy. As China raced from being an undeveloped indigenous market to being the world's biggest - and a main growth driver for global manufacturers - new car sales sped along at double-digit growth. This year, sales may contract for the first time in at least two decades.

That's prompted global car makers such as BMW BMWG.DE to intensify training programs, teaching dealers how to maximize revenue from businesses beyond just selling new cars.

In a classroom-cum-car repair service bay in Beijing last week, groups of BMW after-sales service managers huddled around tables, poring over spreadsheets on repair revenues per model and productivity per service mechanic.

Elsewhere, new recruits learn how to compose follow-up mobile messages to potential car buyers browsing the showrooms. That personal touch can later help drum up repeat after-sales business that might otherwise go to cheaper backstreet repair yards.

"We're under conditions that make us sweat with urgency, so we need to participate more in these mind-expanding activities and cooperate with the manufacturer to find a way to survive," said Xu Dapeng, who manages after-sales services for a BMW dealership in Beijing and attended last week's training.

As car sales in China soared since the mid-2000s, few manufacturers and dealers bothered to diversify their revenue streams. But around 60 percent of all car dealerships now say they're losing money on each new car sold, prompting manufacturers to build out other ways to make money.   Continued...

 
A dealer carries BMW's promotional cushions at a dealer shop in Beijing, China, September 11, 2015. REUTERS/Kim Kyung-Hoon