How Foreign Automakers Shove Cars Down Chinese Dealer Throats

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This is The Morning Shift, our one-stop daily roundup of all the auto news that's actually important — all in one place every weekday morning. Or, you could spend all day waiting for other sites to parse it out to you one story at a time. Isn't your time more important?

1st Gear: Buy These Cars Are Else

Dealers in the United States are well organized and have a strong bargaining position when it comes to dealing with automakers, which is why Ford can't just tell some dealership that it needs to sell 1,000 cars in August and thus has to order 1,000 cars, whether or not they can sell them.


Dealers in China don't have that luxury.

High on big profits and big sales, Reuters reports that dealers in China have been put exactly in that situation:

In its report to the government, CADA said automakers have "excessive power" as their targets essentially obligate dealers to buy their cars. That means automakers still earn a profit whereas dealers suffer "rampant losses" because of an inability to sell excess stock to consumers, CADA said.

In separate reports, CADA said 30 percent of dealers profited this year compared with 70 percent in 2010, and that inventories were equivalent to 1.8 times monthly sales, above the "alert line" of 1.5. A stockpile of 0.8 times to 1.2 times is generally considered healthy, industry analysts say.

The Jiangsu Automobile Trade Management Association this month said 30 of 34 FAW Toyota dealerships in the eastern province were losing money, partly because they were obliged to buy a set number of cars from FAW Toyota or face penalty fees.


I want to be in the business where you can dictate how many cars you're going to sell and not have to worry about actually selling them.

2nd Gear: Hyundai Will Still Build More In China


Hyundai will build two new plants in China, instead of just one, as it tries to deal with the fact that demand is still outpacing supply globally. As a less-established player in China and with global needs for product, Hyundai isn't quite in the situation above. They need cars.

Per the WSJ:

The decision to build two factories in addition to Hyundai’s three existing plants in China comes as the Korean auto maker is struggling with capacity constraints globally at a time when its rivals are raising output to take advantage of a recovering global economy.

“The new factories will lay the groundwork for us to better compete with such rivals as Volkswagen and GM for the top spot in China,” Hyundai said in a statement.


They may also expand in the U.S. as they continue to sell many cars here.

3rd Gear: There Is No Silver Bullet Way To Hit Fuel Economy Goals


European regulators have tighter restrictions on emissions than the EPA, and while automakers would love a high-range, low-cost battery solution to their problems it's not something that exists yet. In fact, there is no one piece of technology that exists to create a mass market economical car that people will want to buy.

Thus, we're going to see a lot of hybrids and EVs and diesels and all sorts of solutions. From Neil Winton's latest column over at The Detroit News:

IHS Automotive's latest forecasts for battery-electric vehicles in 2020 and 2025 remained virtually unchanged. Hybrid estimates have advanced microscopically to 5.1 percent in 2020 and 6.6 percent by 2025. Fuel cell market penetration will remain almost invisible, even by 2025.

IHS Automotive analyst Pavan Potluri is wary of claims by manufacturers that a technology breakthrough is imminent.

"Most of these claims tend to fizzle out a bit. Having said that, there has been some much needed progress, especially in terms of cost, which would increase the performance and affordability of battery-powered vehicles. Also, automakers who have been dabbling with FC (fuel cell) technology – GM, Hyundai, Daimler, etc. – are hedging their bets and investing in FC, electric vehicles, hybrids, to cover their portfolio to meet the targets. As it currently stands, there is no silver bullet technology yet," Potluri said.


Strangely, Winton argues that even if they found the silver bullet technology they'd be forced by regulators to hit an even more intense argument. I mean... yes? But that's not a bad thing. If hitting targets is creating silver bullet technology then maybe we need more targets.

4th Gear: Teens Drive Old Cars, Die


While I'm against giving children nice, new expensive cars, I don't know if I'd give them old Explorers and here's why:

From The Freep:

A new study finds nearly half of drivers ages 15 to 17 who died in car crashes from 2008 to 2012 had cars that were at least 11 years old, and nearly a third drove small cars.

The study, authored by two Insurance Institute for Highway Safety researchers, chronicled the government's Fatality Analysis Reporting System data from 2008 to 2012. It appeared Dec. 18 in the journal Injury Prevention.

At least in part, the statistics simply reflect the cars that teens drive. Compared to middle-aged drivers killed during the same span, the study notes that teens overwhelmingly drive smaller, older vehicles. What's more, the researchers cite a survey of parents in May, 2014, that found some 60% of teenagers drive cars at least 8 years old. In the FARS analysis, 82% of teens killed in wrecks drove cars that were at least 6 years old.


I wonder how many kids were killed in Alfas, though? C'mon.

5th Gear: Automakers Don't Want Another 2014


With decent stores of cash and expanding sales, it's kind of the perfect time for all automakers to take a look at how they deal with safety defects and spend the money and effort improving the way they they do business.

Here's a good example from the NYT:

The auto industry’s intense focus on neglected safety issues has changed the way it approaches even the most basic safety practices.

Like most automakers, Toyota routinely notifies car owners of safety recalls with the minimum legal requirement of mailing a first-class letter.

But in recent months, the automaker has taken the unusual measure of hiring outside companies to track down owners of vehicles equipped with defective airbags that can explode. The contractors have been instructed to make direct contact with the owners by telephone.

“Sending out letters just isn’t enough anymore,” Mr. Carter said. “We need to call the consumer and explain the importance of getting their cars repaired.”


I wonder if there was a similar article in the NYT after the Firestone debacle?

Reverse: Your Yearly Reminder That Henry Ford Was A Dick

On December 31, 1927, the Dearborn Independent—a newspaper published by Henry Ford that, at the peak of its popularity in the mid-1920s, had about 700,000 readers—rolls off the printing press for the last time. Since 1920, Ford had used the paper as a platform for his anti-Semitic ideas, and many of its articles and essays were collected and published in a book called "The International Jew: The World's Foremost Problem." It was a bestseller in Nazi Germany and remains in print today.




Neutral: What's The Ideal Dealer/Automaker Relationship? Who does it right?

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