Carmakers were warned against overexpanding their capacities and dealerships as the number of dealers reporting shrinking profits or even losses was rising.
Sinomach Automobile - the third largest dealer on the mainland - told the Automotive News China conference in Beijing yesterday that carmakers were facing an imbalance between supply and demand. The conference was held on the sidelines of the Beijing Auto Show.
'We expect sales of imported cars to grow by about 20 per cent to one million this year,' said Sun Yong, the company's deputy general manager. 'However, some carmakers forecast growth of up to 50 per cent or even 70 per cent.'
A survey by JD Power and Associates of 1,605 dealers of 38 brands in 59 cities found profitable dealers shrank to 63 per cent last year from 81 per cent in 2010, while 20 per cent saw losses, against 9 per cent previously.
Sun expected profits to shrink this year. 'It is a challenging year as competition has intensified and supply and demand are off balance. Dealers' profits will dip further,' he said.
ADP Dealer Services, which provides management systems to the industry, said the average net profit of car dealers last year was about 5.2 per cent but a 'cold winter is coming'.