First-half profit growth of dealers short-lived or spring arrival?

In the just-concluded August, from the semi-annual report data released by the major listed distributor groups, the performance generally has a relatively high growth. For example, CGA's revenue for the first half of the year increased by 30.78% year-on-year, and net profit increased by 57.7% year-on-year; Zhongsheng Group's revenue for the first half of the year increased by 20.7% year-on-year, and net profit increased by 53% year-on-year.

The auto market is bleak. Why can dealers also scold the market? According to industry analysts, this is mainly due to the refined management of dealer groups, the development of intermediate businesses, and the optimization of network layout. However, under the background that the domestic new car market has topped the globe for the seventh consecutive year and the car ownership has exceeded 200 million vehicles, the improvement of dealer profitability is a flash in the pan, or is the real spring coming?

Why profit improvement?

As the macroeconomic environment and the auto market both entered the “new normal”, from 2016, dealer groups have embarked on the path of rapid transformation, and some have already begun to show results. For example, CGA, which adheres to “endogenous growth + expansion”, continues to expand its merger and acquisition integration strategy in 2017, regaining super-luxury, luxury, and mid- to high-end brand outlets, and strengthening comprehensive services to strengthen its profitability. These measures, while optimizing the new car business, have also enabled Guanghui's after-sales services, used cars, and financial leasing businesses to grow rapidly.

Profits from the transformation have resulted in a huge increase in profits. Although the income of passenger vehicles has maintained a low growth rate, its value-added services such as finance, insurance, and high-quality products have all improved significantly. Sales of new energy vehicles and parallel imports of innovative vehicles have exceeded sales. last year. In order to adapt to the new situation, Huge Group also accelerated the deployment of the travel market and increased the efforts to integrate company resources and revitalize assets.

On the whole, China's auto market has entered the buyer's market, and car sales have entered the era of meager profits. Therefore, it is more and more important for dealers to tap their own internal power, and to be more profitable for management. Fine management and improvement of management level have become one of the important means to increase profitability. At the same time, the consolidation effect of the large distributor group is more prominent, and the trend of increasing industry concentration will continue.

In order to increase profits, distributors have generally strengthened the layout of used cars, finance, and quality products. In the aspect of new car sales, optimizing its own sales network, in order to adapt to the trend of domestic consumption upgrades, it will strengthen the brand management and sales services for high-end and luxury cars, which is also one of the important reasons for the improvement of profitability of dealers in the first half of the year.

So, can this trend of profit improvement continue?

Market competition is still grim

At present, the declining trend of the auto market has become very obvious. It is generally expected that the increase in automobile production and sales in 2017 will be only about 5%. Data show that the first seven months of this year's automobile production and sales increased by only 4.7% and 4.1% year-on-year, of which, passenger car production growth was only 3% and 2%, the market trend is a serious downturn. According to Cui Dongshu, the secretary-general of the Federation of Travel Unions, this is not only the effect of the 2016 purchase tax overdraft factor, including other economic conditions such as the stock market and the downturn in the property market, but also has a greater impact on the auto market.

As you can imagine, car dealers are currently more difficult to increase sales than ever before. Yan Jinsong, general manager of the operating support center of Yingzhong Automobile Group, made it clear that since 2017, the auto consumption market has maintained a “slight increase” momentum, and the promotion of the national auto industry policy has also spawned new auto business models and new business models. In this kind of environment, market competition is still severe.

From the perspective of consumers, the data released by the China Association of Automobile Marketing Managers showed that the consumer level index for August was 44.63 points, which was 5.37 points lower than the Rongshui sub-waterline, indicating that consumer purchasing power is still not optimistic.

However, there are signs of improvement in the downturn in the auto market. In August, the inventory warning index for dealers dropped to 47.1%, which was the first time this year was below the Ronghe line. Moreover, the auto maker's confidence index for the market is 52.67 points, which means that it is still optimistic about the market's future trend.

Yan Jinsong believes that in the current market environment, car dealership groups with 4S stores as the main body still have to maintain their confidence. In the future, they can mainly exert force in three areas: strengthen internal operating capacity, enhance development, focus on the layout of brands and regional structures, and continue to promote external The business is pioneering and innovating, looking for differentiated profitable channels for derivative business; combining the Internet+ mode to operate customer asset management, and opening up full value chain management channels such as customer-selected vehicles, car purchases and after-sales services.

How to crack the industry's difficulties

Beiqi Penglong Group also believes that the distributor group must make overall plans for manpower, finance, operation and management, etc. before it can continue to achieve major improvements in its operations and management, and bring about a rapid increase in profitability.

No matter what kind of change is decided, its purpose is to adapt to market changes and create greater corporate value. Distributors obviously want to quickly get rid of the single reliance on new car sales, but looking at the status quo in the industry, sales revenue will continue to be the highlight of its revenue for a long time to come. At the same time, selling cars is also the basis for dealers to launch high-profit aftermarket operations. Otherwise, “there is no need for fur to hide”.

Faced with shortages of leads, low conversion rates, and industry pain points for customer churn, strengthening the online network layout has become an industry consensus. However, it is obvious that staying in a car vertical internet platform is obviously better than building a self-built online network. According to data from the DCC Department of a Buick dealership in Xiamen, after using the sales products launched by the Autohome dealer service platform, due to the richness and accuracy of data content, it can provide better insight into consumer demand and improve communication efficiency. The clue to invite the store to increase by 30%.

Through technological innovation, the optimization and upgrading of the online car-watching experience will also benefit dealers. Chery Shandong, a 4S shop, said, "The 4S shop panorama showroom of the car home can increase customer stickiness and increase clues. We only carried out AR red envelope activities, and the amount of clues received in one week was three times more than the weekdays."

No business model can survive forever, and no one can be eternal. As the Beiqi Penglong Group believes, in the long run, the important indicators of the refined management of dealer groups are mainly related to the continuous improvement of service quality and the full play of group effects. It is necessary to actively organize participation in various marketing and promotional activities, especially the line. The precision of marketing activities and sales leads, and the richness of clues are more important than ever. “In the first half of 2017, relying on the strong online advertising channels and a large number of high-quality sales leads of the Auto House, the Beiqi Penglong Group provided a good boost to the performance growth.”