Car dealers in China’s Yangtze delta region warn of ‘severe challenges’

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BEIJING (Reuters) -Car dealers in one of China’s richest regions are appealing to automakers to overhaul sales strategies amid mounting pressure on their cash flow and high inventories in another sign of the growing toll of the price war in the world’s largest car market.

Four dealer associations based in the Yangtze River Delta encompassing Shanghai city and the provinces of Jiangsu, Zhejiang and Anhui, issued a joint letter on their WeChat accounts on Monday, going public with the pressures they face.

Most automakers sell their vehicles in China via dealerships, and the Delta region accounted for 23% of domestic car sales in 2024.

“Car dealers in the Yangtze River Delta region face severe challenges such as high inventory, disorderly market competition and increased risk of capital chain rupture,” said the letter that was addressed to “all automakers”.

“Some automakers have forced dealers to sell new cars at prices below cost,” they added without naming any firms, saying such a strategy could violate China’s competition laws.

Dealer associations in the provinces of Henan and Jiangsu issued similar letters last week, while suppliers and dealers have both asked carmakers to pay them more promptly.

The complaints indicate that Chinese automakers are continuing a years-long price war despite orders from regulators to stop as the strategy eats into the industry’s profitability and financial health.

The four dealer associations also said that inventories were above healthy levels. A gradual suspension in car loans in the region since June has compounded the problem leaving consumers who thought they had financing unable to pick up their cars, they added.

The dealers made a number of suggestions, including that carmakers should allow them to suggest a reasonable inventory limit and adjust sales targets to better recognise the capacity of the regional market.

China’s legislature passed amendments to the anti-unfair competition law last week. The revised law strengthens rules against forced below-cost pricing and will come into effect in October.

(Reporting by Qiaoyi Li, Zhang Yan and Brenda Goh; Editing by Kate Mayberry)