Auto Dealers And Sales Crash Hard Into Pandemic
More than 1,000 so-called "4S" auto dealers were forced to abandon their businesses in the first half year due to the toll of the coronavirus pandemic, with 38.3% of these auto dealers reporting revenue losses and sales revenues reaching just 37.6% of the total in 2019, according to the China Automobile Dealers Association (CADA).
To survive the tough times, large-scale auto dealers such as ZhengTong Automotive Service Holding are finding richer partners. In ZhengTong's case, it is selling 29.9% of the company's shares to state-owned Xiamen ITG Holding Group, ZhengTong said last week in a statement.
Only 21.5% of 4S auto dealers experienced a sales increase in the first half, with 60% of those selling luxury and imported cars.
The concept of 4S dealers – those involved in sales, service, spare parts and customer Surveys – took China by storm in the early 2000s, mostly with imported automobiles, by providing a world-class level of after-sales support leading to high profits for these flagship stores. In the current economy, 4S dealers have taken a beating in sales while consumers choose not to pay the costs for dealership repairs once the warranty period expires, according to a report by the Cheung Kong Graduate School of Business.
The drastic revenue losses not only reflect an oversupply but also exposes the issue that auto dealers had been overly dependent on direct new car sales and neglected after-sales service and lacked operational abilities for second-hand car sales, said Shen Jinjun, chairman of CADA.
The decreasing revenues have triggered conflicts between auto dealers and automakers. Since 2019, roughly 1,000 auto dealers have filed claims resulting in compensation of over RMB1.5 billion, according to auto trading platform autohome.com.cn.
Most auto dealers don't have positive projections for sales this year, CADA said, while some auto factories have set such high sales goals that auto dealers have to offer huge discounts to meet these goals, leading to reduced profit margins for dealers.
France-China Fund Invests $95 Million in Dutch Opthalmic Group
The France-China Cooperation Fund, launched by Eurazeo Capital, BNP Paribas and China Investment Corporation (CIC), announced it has closed its first-round investment in Dutch Ophthalmic Research Center (D.O.R.C.) to the tune of about €80 million ($95 million).
D.O.R.C., which describes itself as a leading specialist in vitreoretinal surgery equipment and services, plans to focus on developing its presence in the China marketplace.
China's ophthalmic market is set for rapid growth in the coming years, driven by a rapidly aging population, with the total market value expected to grow 8.5% annually from its current $2.7 billion to $4 billion in 2022. China has nearly one-third of the world's blind people, with cataracts accounting for half of these cases. Additionally, glaucoma and retinal disease are increasing. There will be strong growth in retinal disease and cataract surgery, according to a report by industry information firm Market Scope.
The fund is managed by Eurazeo Capital, whose managing director, Chen Yonglan, stated the operation of the fund is entirely market-based, 21st Century Business Herald reported.
In April 2019, Eurazeo Capital announced the completion of its acquisition of D.O.R.C. while Eurazeo Capital IV, under the management of Eurazeo Capital, holds shares of Dutch Ophthalmic Research Center valued at €300 million.
The cooperation fund had reportedly established a consulting committee in China to assist D.O.R.C. to develop services and products aimed at the China market.
Huawei To Roll Out F5G Network
Huawei is rolling out a RMB2.5 billion ($360 million) investment plan to develop the Fifth Generation Fixed Network (F5G) industry over the next five years, China Business Network (CBN) reported.
The F5G, a term Huawei coined for the fifth-generation of broadband and WIFI, will feature full-fiber networks and ultra-high bandwidth, supporting services such as cloud VR. To date, no local carriers have signed onto the project.
As key parts for the construction of new infrastructure and improved connectivity, 5G and F5G will supplement each other in difference scenarios. For example, 5G is suitable for driverless car and Internet of Vehicles, while F5G is more for Industrial Internet, Internet Data Center and enterprise campus networks, said Ji Yuzhi, GTM Manager at Huawei.
As of this April, the National Development Reform Commission confirmed the inclusion of F5G into the core construction of new infrastructure and stressed its commitment to advance fiber broadband networks.
Foreign-Trade Industry Refocusing On Domestic Markets
While COVID-19 has bolstered domestic e-commerce businesses, the same boost is not been seen within the foreign-trade industry, which faces weakened demand in overseas markets.
In the key foreign-trading areas of Shanghai, Zhejiang, Jiangsu, Fujian and Guangdong, foreign-trade enterprises are undergoing efforts to repurpose export commodities for domestic sales but face difficulties in finding agents and entering domestic sales channels, Economic Information Daily reported.
These challenges persist despite government initiatives to support foreign-trading companies to shift focus to developing domestic demand.
The Commerce Ministry of Jiangsu province has held 22 online exhibitions to encourage the expansion of domestic sales channels and decrease overstock for foreign-trade companies. Guangzhou Customs allowed the foreign-trade companies to postpone tax payments. Quanzhou city in Fujian province set up a large-scale network for traders to sell commodities through online platforms.
A source within a fabric import and export company said that most foreign-trading entities are factories accustomed to simply filling bulk orders from foreign buyers and lack familiarity with developing their marketing and sales processes. With little brand influence in domestic markets, foreign-trading companies have to barter away profit margins merely to sell off their overstock.
Even though some major e-commerce platforms can attract high numbers of online consumers, the commission fees the platforms charge are fairly high, offering these foreign-trading companies high browsing traffic but little actual benefit in increased sales, the source said.
Panshi CEO Transitions to Chairman's Role
Tian Ning, the founder of Panshi Information & Technology, announced he would step down as CEO of the company and become its chairman, focusing on Panshi's long-term strategy.
Patrick Chen, the co-founder and CHO of Panshi, will be the new CEO of the Zhejian-based company, China Business Times reported.
This moves come as part of a series of top leaders stepping down from major Internet companies this year: Zhang Yiming resigned as CEO from the news aggregator Toutiao; Liu Qiangdong resigned as executive director from retail tycoon JD.com's parent company Beijing Jingdong Century Trading Co., and Huang Zheng stepped down as CEO of e-commerce company Pinduoduo.
In Panshi's annual internal meeting early this year, Tian Ning stated his intention to cultivate more young managers for Panshi and build a vibrant team. Panshi's revenues in 2019 blossomed to 280% of its 2018 revenue, with half of those revenues coming from overseas.
Similar plans were also addressed last month by Pingduoduo's Huang Zheng, who stated that the rapid expansion of Pinduoduo had pushed him to upgrade the management team and enhance its organizational structure, including the company's partnerships.
