Chinese car dealer Guangdong Yongao’s collapse signals another bruising year for stagnating market

A Chinese car dealership that operated as many as 80 stores across the southern province of Guangdong went bankrupt last week, in a sign the intense competition that has roiled the world’s biggest car market may extend into another year.

Salespeople from Guangdong Yongao Investment Group notified customers on January 17 that the company had collapsed and orders are suspended, while employees are waiting to be paid outstanding wages, Chinese media outlets including National Business Daily newspaper reported. The dealership sold about half a dozen marques, including Honda Motor, Volvo Car and Guangzhou Automobile Group’s electric-vehicle brand Aion.

Photos shared on social media showed about 20 yellow tow trucks set to be dispatched last Wednesday, with users saying that they had been sent by banks to repossess vehicles. Bloomberg News was not able to verify the images.

Yongao’s ordeal shows how dealers are being squeezed on multiple fronts. High sales targets set by carmakers are pressuring them to get cars out the door while a slowing Chinese economy has seen many customers delay purchases in the hope of deeper discounts. Just over a third of the country’s car distributors were able to achieve their sales targets last year, according to the China Automobile Dealer Association.

The company said on Friday three years of Covid curbs, changes in the car market and insufficient risk controls had tipped it into a crisis, media outlet Netease News reported, citing a statement. Yongao has set up a management task force and will try to ensure car deliveries to customers, and pay outstanding wages. Some dealerships are closed and some vehicles have been moved as part of a contingency plan, according to the report.

There were signs of distress at Yongao as early as April last year, when employees lodged complaints with the Dongguan government about the company withholding wages, NBD newspaper reported.