Introduction: Cadillac and Chevrolet were "named and criticized" by the China Automobile Dealers Association due to their excessively high inventory factors. SAIC-GM "pressurized the warehouse" to dealers, just to complete the sales target, or is there another reason?
Recently, the China Automobile Dealers Association released the results of the February 2022 "Auto Dealer Inventory" survey: the comprehensive inventory coefficient of auto dealers in February was 1.85, up 26.7% month-on-month and 10.1% year-on-year.
This seems to be different from the style of many listed car companies explaining in the announcement that "lack of core" has led to a decline in sales. Car companies have no cars to build, but dealers have climbed inventories...
The China Automobile Dealers Association believes that with the small climax of car purchases in the opening season, the successive holding of spring auto shows and the intensive listing of new cars, in order to prepare for the March car market, after the light loading festival, dealers entered the replenishment stage in the fourth week of February. At the same time, some manufacturers have a tendency to pressure the warehouse, coupled with the impact of the epidemic in Guangdong, Suzhou and other places, resulting in a significant increase in the inventory level of dealers.
Therefore, it is normal for the inventory to rise to a certain extent compared with the previous low level, but beyond a limit, it may cause greater pressure on dealers.
Therefore, when the China Automobile Dealers Association announced the top three car brands in inventory, two of SAIC-GM's brands: Chevrolet and Cadillac, were "named", which was somewhat surprising; the other was FAW-Volkswagen, which has long ranked first in sales.
1) SAIC-GM was "named", and its two major brands were both on the list
Among the three auto brands with more than 2.5 months of inventory depth at three dealers, SAIC-GM "shined" and won the top two. Among them, CADILLAC, a "luxury brand" under SAIC-GM, "came out on top" with an inventory factor of 2.73; Chevrolet, which was "out of the same door" as Cadillac, "ranked second" with an inventory coefficient of 2.53.
The inventory factor is an indicator similar to the inventory turnover rate, and its basic formula is to divide the amount (or quantity) of the vehicle inventory at the end of the month by the amount (or quantity) of the vehicle sold in the current month. The inventory coefficient is too high, indicating that the dealer has more inventory vehicles, and there may be operational risks.
For car dealers, the relatively healthy inventory coefficient is usually 1.5 to 2.0, and the inventory coefficient is greater than 2.5, indicating that the vehicle inventory is too high, which should cause the vigilance of the relevant car companies. Both Cadillac and Chevrolet had an inventory factor of more than 2.5 in February, indicating that their inventory in the dealer's warehouse was no longer within the normal range.
The backlog of vehicle inventory naturally makes people suspect that the sales of these two major brands are not good. After all, SAIC-GM's recent sales performance has indeed been unsatisfactory, and sales have been down for 11 consecutive months year-on-year.
However, the sales of these two brands in February were not as bad as the overall performance of SAIC-GM. Cadillac sold about 13,500 units in February, up 8.02% year-on-year; Chevrolet was even more severe, with sales of about 20,400 units in February, up 76.32% year-on-year. To some extent, this seems to be transferring the company's inventory to the dealer.
Dragging SAIC-GM's sales laggards, Buick, whose inventory depth was not on the list, sold about 42,000 units in February, down 18.5% year-on-year.
In the industry's view, since Cadillac reduced the price of the quantity, the brand influence has been much worse than before, and even in the mercedes-Benz, BMW and Audi competitors, Cadillac has been eliminated.
Between Chevrolet, Buick and Cadillac, under the pressure of huge market competition, the difference between brands is becoming more and more unclear. However, the backlog of Cadillac and Chevrolet inventory in February 2022 is likely to be intentional by SAIC-GM in order to cooperate with its new energy strategy.
2) Fight for the future, SAIC-GM radical transformation
The setbacks to traditional businesses have radicalized SAIC-GM's new energy strategy.
According to the official statement of SAIC-GM, SAIC-GM will invest 50 billion yuan in the next five years to launch more than 10 domestic new energy models based on the Ultium platform, covering 3 major brands of Cadillac, Buick and Chevrolet.
Not only that, SAIC-GM has also set the sales target of new energy vehicles to reach 20% and 40% of the total in 2025 and 2030, respectively.
Compared with other traditional car companies, SAIC-GM's "new four modernizations" transformation is already too late. Moreover, cadillac Lyriq mass production is imminent, which means that it can not afford to delay, must quickly complete the transformation, the production line for electrification and upgrading, but the transformation of the production line will inevitably affect the current output, the output is not guaranteed, the sales volume naturally does not go up. This will also prolong the cycle of consumers waiting for cars, affecting the reputation and market share of corporate brands.
Not only to complete the transformation of the production line, but also to ensure that dealers have cars to sell during the transformation of the enterprise, so as not to have a shortage of supply, these two seemingly contradictory goals, CAN SAIC-GM complete them all?
One solution is to overstock some more inventory to dealers before the factory renovation. With these stocks prepared in advance, car companies can ensure that there are always cars to sell in the market while transforming with peace of mind, which can be described as the best of both worlds.
However, the good fortune is often accompanied by high risks.
3) High inventory or a time bomb
In the auto market, high inventory is like a sword of Damocles hanging over the heads of car companies and dealers, which may bring unexpected trouble to car companies at any time.
First, the vehicle backlog can create some quality issues. The so-called "long-term suspension of the most injured car", parked in the warehouse for a long time, the new car may appear parts aging, loss of electricity and other losses; the circuit on the car may also be bitten by rats; if the dealer warehouse is open-air, the new car also has to face the test of sun exposure, wind and rain. These potential problems deserve consumers' attention.
Secondly, it will cause operational pressure on dealers.
Although car companies can rely on their own status advantages to "press the warehouse" to downstream dealers ("pressure warehouse" is the abbreviation of backlog inventory), this does not mean that dealers will necessarily "go against the grain".
Car companies "press the warehouse" to dealers, which not only passes on the sales pressure to dealers, but also occupies the dealers' funds and resources. Therefore, dealers are very disgusted with the "pressure warehouse" of car companies.
In 2010, BYD's dealers had a falling out with car companies because of the "pressure library" problem. According to statistics, as many as 308 dealers withdrew from the network by BYD that year, and the overall dealer withdrawal rate was as high as 22.63%. Subsequently, Chinese automobiles bid farewell to the "golden age" of high growth, and the tension between manufacturers has become commonplace.
Therefore, taking history as a mirror, SAIC-GM should be more careful about its relationship with dealers. After all, the marketing work after the launch of pure electric vehicles is still inseparable from these downstream dealers. Unless SAIC-GM emulates Tesla and fully enters the era of direct operation.
In addition to some problems with high inventory "comes with it", SAIC-GM seems to have encountered an unexpected challenge.
On March 11, GM's global executive vice president and GM China president Bai Li told domestic media that it would sell GM luxury cars that are currently unable to be sold in China through existing brands. This includes the Chevrolet and Cadillac brands.
GM's decision to restart its import business in China may not be good news for SAIC-GM, which has already built a high inventory. At present, imported cars in the domestic market are much more popular than joint venture cars.
According to data released by the China Automobile Dealers Association in February, the inventory coefficient of high-end luxury & imported cars is 1.6, while the inventory coefficient of joint venture cars is as high as 2.01, which is 1.26 times that of the former. Domestic Cadillac and Chevrolet meet the imported "brothers", can they still smoothly "clear the warehouse" together? This depends on SAIC-GM's marketing capabilities, don't digest it internally, and foreign monks have to grab resources.
The author believes that SAIC-GM's adoption of such a radical new energy strategy is undoubtedly a dangerous move. The high inventory of Cadillac and Chevrolet in February is likely to be one of the side effects of this aggressive strategy.
However, now that the window period of the high-end new energy vehicle market has almost passed, SAIC-GM may not be able to afford to wait.
The new car-making forces represented by "Wei Xiaoli" have shown their magic, and have launched many high-end new energy models with their own characteristics, and even appeared the "explosive model" with a cumulative sales volume of 144,770 units such as the ideal ONE.
Traditional car companies are also catching up on this track. Lantu Automobile, a subsidiary of Dongfeng Group, shouldered the burden of the group's brand upwards; Great Wall Motors also showed the first model of the salon to the public at the Guangzhou Auto Show last year, the Mecha Dragon; and Geely's Extreme Kr 001 began to be delivered in October last year, delivering a full 10,000 vehicles in only 110 days, creating a record for the fastest delivery of the first model of a high-end intelligent electric brand...
Therefore, for SAIC-GM, this electrification transformation is not only forced by the situation of the "new four modernizations" of the automotive industry, but also its own initiative to give it a go and become stronger. Danger and hope are intertwined, and although it is a dangerous road, it is also a road of hope.