General Motors Company (NYSE:GM) has adopted a retail sales strategy in an attempt to adapt to the changing Chinese market.
The renowned automobile maker is now the most recent foreign vehicle provider in China to initiate retail sales rather than wholesale deals. The Chinese market happens to be the biggest automotive market, but the country’s recent slow growth has caused demand for foreign vehicles to go down. Companies are therefore trying to re-evaluate their strategies in an effort to keep up with the changing conditions.
In April, General Motors reported sales with regards to the number of vehicles that were sold to Chinese end-users or consumers in the market rather than vehicles sold to dealers. The strategy seems to be a good way to handle the decreasing demand for foreign vehicles. At the same time, other companies seem to be embracing the idea. Honda reportedly switched to the same strategy from April.
Other companies such as Nissan had already initiated the retail sales strategy a while back beginning from January. The decision to go around middlemen has various advantages to it. Through this method, automobile companies can maintain a margin by marking up the amount that dealers would have occupied. Additionally the move is beneficial to car buyers because prices will not be hiked.
Wholesale passenger vehicle sales have been down for the past two years. However, they have recently experienced a 3.7% rise in the first quarter of 2015. Unfortunately, the slow performance of the market has been denting to most business relationships. More into detail, the relationship between dealers and the respective automakers has suffered the most.
Dealers have been complaining that car manufacturers have been raising their sales target bar too high. In the meantime, the dealers have been suffering from poor business and accumulated cars which have not been seeing a lot of sales due to low demand.
Despite the negatives, it is nice to see the vehicle manufacturers adopting ways to get around their problem.
