Auto sales management to improve competition, after-sales services

By Ma Jingjing Source:Global Times Published: 2017/4/19 19:43:39

New avenues for selling cars


On Friday, the Ministry of Commerce unveiled new auto sales management measures, stating that dealers don't have to secure authorization prior to selling automobiles, and automakers and auto suppliers should not restrict dealers' operations. The new measures will take effect on July 1, replacing the 2005 auto sales management system. Experts and companies said the new measures will make the relationship between market competitors more equal and could better protect consumer interests. Meanwhile, experts said the just announced measures to create a new electric vehicle sales network will help the sector develop.

New cars fill out a parking lot in Zhengzhou, capital of Central China's Henan Province, in December 2016. Photo: CFP



Graphics: GT



China's auto dealers will no longer need authorization from brand owners to sell vehicles from July 1, which experts and market players said could put automakers, suppliers and dealers on more equal footing, promote competition and protect consumer interests.

Both authorized and unauthorized auto sales firms are allowed to operate in China, with automobile marketplaces, stores and e-commerce platforms becoming new auto sales channels, the Ministry of Commerce (MOFCOM) said in a statement on its website on Friday.

The existing auto sales management system went into effect in 2005. It requires all dealers to gain authorization from brand owners, MOFCOM said. It will be repealed on July 1.

Compared with the 2005 car sales system, the new measures include changes to authorization, after-sales services management and automakers' restrictions on dealers.

The 2005 system required authorization, while the new measures encourage selling automobiles through new channels. For suppliers selling cars by authorizing dealers, the authorization period should be no less than three years every time and the first authorization period should be no less than five years, according to the new measures listed on gov.cn. Without authorization, dealers must remind consumers and inform them about the subject of liability in written forms, it said.

In addition, the old system states that dealers should provide after-sales services in accordance with the authorization agreement. By contrast, the new measures require that a supplier should neither ask dealers to both sell cars and provide after-sales services, nor restrict them from selling parts or providing services for other suppliers.

Under the new measures, dealers are required to clearly display products and services prices and not subject customers to extra, hidden charges.

China remained the world's largest auto market from 2008 to 2016. Domestic automobile output and sales reached 28.1 million and 28.03 million in 2016, increasing 14.46 percent and 13.65 percent year-on-year, respectively, January data from the China Association of Automobile Manufacturers (CAAM) showed.

Extensive influence

The old management measures have helped advance China's auto marketing and services by regulating market order and boosting the sector's development, but it has also given rise to problems including monopolistic operations, incomplete competition and expensive cars and auto parts, according to the MOFCOM statement.

The upcoming sale-without-authorization method complements the 2005 system. The new method will likely boost industry competition and benefit consumers, said Cui Dongshu, secretary-general of the China Passenger Car Association.

"The new auto sales management measures could have a great impact on carmakers and suppliers, putting them and dealers on a more equal footing," he told the Global Times on Tuesday. "By eliminating restrictions from carmakers and suppliers, dealers can operate as they choose, allowing them to decide whether to provide after-sales services and how to decorate their stores."

"We applaud the upcoming policy. And we will strengthen our competitiveness by making some adjustments. For example, we may give discounts on auto parts to win more clients," Wang Rongzhen, owner of a Hyundai dealership in Nantong, East China's ­Jiangsu Province, told the Global Times on Tuesday.

Currently, domestic auto dealers can only gain profits from after-sales services but with a pretty high cost because they need to hire more workers to do specific jobs, Wang said.

However Wang said that he was afraid that the new policy may have limited influence on the existing auto sales model in the short term. The reason he cited is that the automobile sale prices in marketplaces proposed under the new policy will not be much lower than those at dealerships, though the after-sales services provided by dealers is more guaranteed.

An Audi owner surnamed Zheng in Nanjing, capital of Jiangsu, said that she would go to a dealership to have her car repaired.

"I think their services are more professional and the parts sold in the store where I bought my car are perfectly matched with my car," she told the Global Times on Tuesday.

Some problems still need to be solved to guarantee the smooth implementation of the new policy, according to Feng Shiming, a car analyst at Menutor Consulting.

For example, some car owners who have their vehicles repaired elsewhere may question whether they can still receive dealers' guarantees on their cars, namely for the repair, replacement or compensation for faulty products, he told the Global Times on Wednesday.

Cui pointed out that the authorization model may persist in the long run, as automobile circulation will not instantly change when the new measures take effect.

"We've seen this concept in other markets around the world. It's our responsibility to follow government directions and legislation. So if the government says it's the law, we will make a plan to make sure that we comply with the law," Nigel Harris, president of Changan Ford Automobile Co, told the Global Times on Wednesday at the Shanghai Auto Show.

Now the company is looking at all the dealer agreements, and is figuring out what changes it needs to make, according to Harris.

Spotlight on NEVs

The new measures stressed the new acceleration of the establishment of urban-rural integrated car sales and after-sales service networks, as well as new energy vehicles (NEV) sales networks.

Feng said that the rollout of the policy indicates that the government is genuinely determined to give NEV subsidies to consumers, considering that some NEV manufacturers have gamed the system to win subsidies for themselves.

It is possible that NEVs may be sold on e-commerce platforms and repaired at car owners' homes, Feng said. Traditional automobiles are equipped with combustion engines, while batteries power pure electric vehicles, which makes it easier to maintain NEVs.

Cui forecast that with the increase of NEVs, dealerships' after-sales service businesses may shrink.

Domestic electric car manufacturers have showcased their latest electric cars at the ongoing Shanghai Auto Show, which opened to the media on Wednesday. At the show, BYD launched its Song EV300 and Song DM electric and plug-in hybrid models.

In 2016, 507,000 battery-powered electric and plug-in hybrid vehicles were sold in China, up 53 percent year-on-year, according to CAAM data.

 

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