The Chinese auto market has hit a downturn, and the decrease in sales is affecting the growth of the industry in China. Where once new dealerships were springing up everywhere, now the dealers are losing money.
Take VW, for example. Volkswagen AG is offering financial assistance totaling 1 billion yuan ($161 million) to support some of its dealers in China as demand slows in its largest market, according to people with knowledge of the matter.
Volkswagen, the biggest foreign automaker by sales in China, is the latest company to extend financial subsidies to distributors hit by the slowing economy and a stock market that lost $4 trillion in market value in less than a month.
Chinese VW.
The funding will be paid to distributors selling VW brand cars made by the company’s joint venture with China FAW Group Corp.
“Dealers are facing some hardships,” Li Pengcheng, a spokesman for FAW-Volkswagen, said, indicating that VW would help the dealers out.
VW’s sales with its joint venture partner FAW fell 10 percent in the first six months of the year, according to data compiled by Bank of America Corp.
Auto sales in China fell for the first time in more than two years in June. VW and other carmakers have cut prices to attempt to keep market share as demand slows and domestic rivals lure increasingly value-conscious customers with cheaper sport utility vehicles. BMW AG earlier this year agreed to pay subsidies to its distributors in China to help cover losses after retailers stopped ordering cars from the manufacturer.
However, retail deliveries of cars, multipurpose vehicles and SUVs fell 3.2 percent last month to 1.43 million units, the China Passenger Car Association said.
