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The influence of policy factors on the three big factors restricts the dealers running
As more external capital flows into the automotive industry, competition within the automobile distribution sector has intensified significantly. Since last year, major distributors in Hunan have proactively adapted to these market challenges. Common strategies include aggressive marketing campaigns, price reductions, and direct engagement with communities and consumers. However, according to feedback from 17 auto sales companies that underwent re-evaluation, three key bottlenecks—policy constraints, market size limitations, and structural adjustments—remain critical obstacles for dealers.
Industry insiders view the recent market fluctuations as inevitable. Among the influencing factors, macroeconomic changes are seen as a major driver. The most immediate impact is observed in the off-road vehicle and heavy truck segments. According to Changfeng Cheetah dealers, slowed investment growth, especially due to reduced infrastructure projects in remote areas, has led to weaker demand for off-road vehicles compared to previous years. In response, Hunan-based off-road vehicle dealers have shifted their focus toward urban users and even the private car market.
Another challenge stems from tightened bank credit for auto loans. As banks raise lending standards and streamline procedures, the percentage of car loans in Hunan has dropped from 30% last year to just 7%-8% currently. Additionally, economic uncertainty has dampened consumer confidence, causing some buyers to delay or cancel their car purchase plans.
On October 1st, the new "Automobile Loan Management Measures" came into effect, expanding the definition of lenders to include commercial banks, rural credit cooperatives, and non-banking financial institutions authorized to offer car loans. Despite this, in Hunan, both banks and non-bank financial institutions remain hesitant in offering personal auto loans. The loan proportion for car purchases is unlikely to rebound above 30%, and the family car market has yet to take off.
Industry experts believe that Hunan’s family car market is still in its early stages. The so-called “car boom†is, to some extent, driven by over-extended purchasing power. Liu Zhiwei, Deputy General Manager of Hunan Automobile City Yongtong Co., Ltd., argues that Hunan, including its capital city Changsha, has not truly entered the era of private cars. The percentage of cars bought purely for commuting remains low. Even among affordable models, the primary buyers are self-employed individuals and small business owners who often use the cars for both personal and business purposes.
Compared to cities like Chengdu, the presence of mini-cars in Changsha is still minimal. Popular models such as the Xiali, Geely Pride, Changan Alto, and newer ones like the Chery QQ, GM Wuling SPARK, Hafei Lubao, and Changhe Idir are rarely seen on the streets of Changsha. This indicates that the family car market is far from mature.
Several factors hinder the development of the automotive market. For example, the credit system is still underdeveloped, road infrastructure lags behind, and residents’ incomes have not kept up with the pace of market expansion. The lack of strong purchasing power in underdeveloped regions may be the real reason behind the sudden slowdown in the auto market.
Despite the rapid growth of the past two years, the market expectations created have been difficult to sustain. Now, frequent price cuts and rising oil prices have made people more cautious about holding onto cash. This has further contributed to the stagnation of the family car market.
Structural adjustments at the factory level are also lagging. Most dealers in Hunan represent only one brand, influenced by factory policies. Dongfeng Nissan dealers are a prime example. According to Gong Mengxian, General Manager of Hunan Yuanda Automobile Sales and Service Co., Ltd., while market conditions play a role, the decline in sales is also tied to the factory's structural adjustments.
In June 2023, Dongfeng Nissan announced the establishment of Dongfeng Motor Co., Ltd., marking a significant joint venture in China’s automotive industry. Previously, Fengshen Automobile dealers were the sole representatives in Hunan. After the formation of Dongfeng Nissan, two dealers emerged in Changsha, aiming to expand to 4S stores across the region. While the new network structure is nearly in place, it will take time for product restructuring to fully take effect.
Dongfeng Nissan’s initial models, such as the Sunshine and Bluebird, remain in similar price ranges without opening new markets. The Zhizun model serves more as a consolidation of existing sales rather than an expansion. Combined with the shift to new 4S stores, Hunan Grand Motor Co., Ltd. is unlikely to see significant sales growth in the first eight months of the year.
Currently, the "Scorpio" model is already on the market, and an economical sedan priced at 60,000 yuan will be launched in several months. However, structural adjustments are still in progress, and dealers may need to endure a period of adjustment.
By Gong Ping and Yu Zhimin