*Note: This analysis article only represents Cui Dongshu's personal views, if you have any objections, please leave a message. *In 2023, China's automobile circulation market will show a significant recovery trend, and the new energy vehicle and fuel vehicle markets will grow rapidly. However, due to the rapid increase in overall production capacity, fuel vehicles are facing a continuous contraction, resulting in a large supply, but a huge pressure brought by insufficient demand for fuel vehicles. In particular, the intensification of market competition has brought about a serious inversion of terminal prices, and even the luxury brand segment, which will perform better in 2023, has also shown a passive situation of shrinking new car profits and relying on derivative businesses such as auto finance and insurance to maintain low gross profits. Due to the contradiction between online and offline market information, the cost of dealers to obtain leads has increased, the proportion of sales expenses has increased, and the decline in management expenses and financial expenses cannot offset the impact of the decline in gross profit and the increase in costs of new cars. Compared with the impact of the epidemic on the market in 2022, Chinese auto dealers are in a more difficult and complex market environment, and in the end, the efficiency of listed dealers has decreased significantly, with gross profit margin falling from 8% to 7%, while costs are rising.
Compared with the profit structure of U.S. dealers, the gross profit of Chinese dealers is low, the market competition pressure is high, and the profitability of second-hand cars has not been effectively improved, and there is a large room for improvement in the survival state.
1. The scale of the automobile dealer group
In 2023, the overall operating income of Chinese auto dealers will be growing, especially for companies such as Zhengtong, Harmony, and Baideli, which have shown a large increase in operating income compared with 2022. Other large family merchants, including Zhongsheng Automobile Group, have shown a relatively stable trend, so in 2023, from the perspective of operating income, our main dealer group will still maintain a good trend of continuous growth, and from the perspective of the United States, the main dealer group in the United States will also maintain the characteristics of continuous growth in operating income.
2. Gross profit of automobile dealer group
The average gross profit of Chinese dealer groups in 2023 is around 7%, down 1 percentage point from 8% in 2022 and down slightly from 9% in 2021. Compared to 9% in 2019 and 2018, it also decreased by about two percentage points.
U.S. dealers' gross margins are more than twice that of Chinese dealers. The average gross profit margin of U.S. dealers is about 18%, which is basically stable compared with previous years.
3. Changes in the number of days of dealer inventory
From the perspective of the characteristics of dealers' inventory changes, in general, the inventory of Chinese dealers has decreased significantly compared with 2018.
In 2023, the inventory days of China's mainstream dealers will be at the level of about 32 days, which will remain relatively stable compared with 2022, and the inventory will increase slightly from the low inventory in 2021 and 2020, but it will still be at a relatively low level compared with the normal inventory in 2019 and 2018.
Inventory at U.S. dealers has dropped to 49 days from 66 days. Overall, there has been a significant decline, but the inventory is obviously high relative to that of Chinese dealers.
4. Changes in net profit
The net profit margin of dealers in China fell to 2.1% from 4.8% in 2018, including 1% in 2020. Overall, it is in obvious contrast with the gradual increase in the inventory of U.S. dealers from 2% to 3%-4%.
Especially since 2022, the net profit margin of Chinese dealers has been around 2%. The net profit of major dealers in the United States is about 4%. In recent years, there has been obvious pressure on the profitability of Chinese dealers, and the profitability of American dealers has shown obvious improvement.
5. Management costs are relatively stable
The administrative expenses of Chinese distributors currently account for about 2% of sales revenue, and have remained relatively stable recently, reaching only 1.9% in 2023. The management expense ratio of some large dealers has also dropped significantly, such as Zhongsheng from 1.6% to 1.3%, Yongda to maintain a level of about 2.5%, and Meidong to maintain about 2.8%.
The difference in the management expense rate of the main dealers is still relatively large, with the highest image reaching 4.6%, while the lowest image Zhongsheng is only 1.3%.
6. Financial costs have decreased slightly
The financial expense ratio of China's auto dealer groups has shown a significant decline, from 1.6% to 1.2%, with the best major groups falling from 1.1% to 0.8%.
For example, Yongda and some excellent dealer groups have experienced a significant decline in the financial expense ratio, and have improved corporate profitability by reducing the financial expense ratio and reducing inventory.
7. The sales expense rate has increased significantly
From the perspective of the sales expense ratio, the sales expense ratio of the main dealer group has shown a clear upward trend, from 3.6% in 2018 and 2019 to 4.2% in 2023, an increase of 0.6 percentage points, which is still relatively high.
The sales expense ratio of dealer groups has increased significantly, especially in Zhongsheng Group, which has risen from 4% to 4.3%, Guanghui Group, which has risen from 3.1%, to 3.4%, Yongda Group, which has increased from 4.5%, to 5.5%, Baoxin, which has also increased from 3.3%, and Meidong, which has decreased slightly. Other dealer groups have obvious characteristics of a slight increase, so the increase in the sales expense ratio of dealer groups is an important factor affecting the efficiency of enterprises.
8. Profit characteristics of U.S. dealers - car rental in the United States
Since Chinese dealer groups do not fully disclose the profitability of new and used cars, compared with American auto groups such as All-American Car Rental, we can see the composition of their gross profits. Overall, new car sales accounted for 58 percent, while finance and insurance expenses accounted for 28 percent, and accessories accounted for 42 percent. In other words, from the perspective of the composition of gross profit, accessories and services accounted for 42% of gross profit and 17% of revenue, and overall the performance is relatively good.
The gross profit margin of new cars of American dealers is currently about 8%, and the level of used cars is about 6%, and the gross profit margin is relatively high. The profit margin of finance and insurance business is 100%, so the overall gross profit margin has been formed, the sales business has reached the level of 13%, and the parts and services have reached the gross profit margin level of 47%.
The gross profit margin of the sales business of American dealers is much higher than that of China, and the gross profit margin of accessories and services is similar to that of China, while the profitability of finance and insurance is relatively high, so the profitability of American dealers is diversified and balanced.
8. Profit characteristics of American dealers - Lycia car dealership
Lycia, a U.S. dealership-listed company, also performed better. The composition of the gross profit of Lycia car dealership is 27% of new car sales, 26% of finance and insurance, 33% of services, and 14% of second-hand cars, forming a relatively balanced characteristic, among which the gross profit of the new car of Lycia car dealership in the United States is relatively high, which is the support of core profits, so the comparison between China and the United States, or the gross profit composition of new cars is an important factor affecting the efficiency of enterprises.
Attached: A collection of recent information
*Comparative tracking of annual report indicators of new energy overseas listed companies
*In 2023, the double credit of fuel and new energy will skyrocket
*Discussion on the Classification and Calculation of New Passenger Cars - March * 2024 China Automobile Exports Overseas Part of Data Tracking - February * Auto Market Scanning - December 2024 (March 25 - March 31)
*[New Energy] March 2024 New Energy Passenger Vehicle Manufacturers Wholesale Sales Update
*China's share of the world's new energy vehicles in January-February 2024 is 62%
*Analysis of the National Charging Pile Market - January-February 2024 *China accounted for 32% of the world's automobile share in January-February 2024*The revenue of the automotive industry in January-February 2024 was 1.4 trillion yuan, an increase of 8%, the profit was 58.7 billion yuan, an increase of 50%, and the profit margin was 4.3%*[Passenger Association Forum] Pickup Market Analysis in February 2024*Auto Market Scanning-Issue 11, 2024 (03/18-03/24)
*Lithium battery market analysis for new energy vehicles - February 2024
*China's auto imports from January to February 2024 will drop by 3% for 100,000 vehicles
*Regional market analysis of new energy passenger vehicles in February 2024
*Analysis of China's auto export market from January to February 2024
*Characteristics of the operation of the domestic market of commercial vehicles in China - February 2024
*Car Market Scan - Issue 10, 2024 (03/11-03/17)
*Inventory in the national passenger car market was 3.21 million units at the end of February, with inventory for 57 days
*From January to February 2024, automobile production increased by 4%, consumption increased by 9%, new energy vehicles reached 1.19 million, the penetration rate was 31%, and 28 square meters of houses/cars * Analysis of the promotion of new energy price war on consumers' car purchases * In January 2024, 1.69 million used cars increased by 35% * Trade-in and scrapping and renewal promoted the high-quality development of automobile consumption
*Analysis of automotive market segment trends and manufacturers' competitive performance in February
*Car Market Scan - Issue 09, 2024 (03/04-03/10)
*Model trend of passenger car segment in February *National new energy passenger vehicle wholesale 450,000 in February 2024, penetration rate of 36% *Market structure analysis of passenger car price segment - February
*Analysis of the operating characteristics of the national passenger car market in February
*[Monthly Analysis] Analysis of the national passenger car market in February 2024
*Automobile analysis of the 2024 government work report*Trade-in to reduce logistics costs - promote the strong growth of gas heavy trucks*Comparative analysis of the trend of the national residential property market and the auto market*Analysis of the national rental online car-hailing market - 2023
*The price war in the national passenger car market will continue to be fierce in 2024
*We should never be pessimistic about new energy vehicles*The brand of the Passenger Association will continue to be brilliant in the past 30 years*In 2023, China's automobiles have achieved remarkable results, and the potential is even greater
*Chinese automobiles lead the high-quality growth of China's exports
*Ministry of Public Security Licensing and Driver Data Analysis - January-December 2023
*Analysis of the first batch of new energy vehicles in 2024
*Tracking of the recall status of the national automobile market from January to December 2023*The integration and interaction of trams and power grids is good for the growth of the automobile market*The adjustment of the threshold index of vehicle purchase tax for new energy vehicles is not small*Analysis of automobile license, scrapped exports