Chinese car dealer group collapses as market runs out

China’s car export sector may be booming – last year it overtook Japan as the world’s largest car exporting country – but closer to home the situation is much bleaker. The domestic market has shrunk, and that trend has just forced a major dealer group into bankruptcy.

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Guangdong Yongao Investment Group had 80 points of sale in the southern province of Guangdong and sold several brands, including Honda, Volvo and China’s GAC Aion, Bloomberg reported. But last week it notified customers that the company had gone bankrupt and orders had been suspended, leaving customers waiting for cars and wondering whether they would see their promised new car or get their money back. According to China’s National Business Daily, the company’s employees are also in limbo, as they are owed wages that they are now unlikely to receive.

Images recently emerged on social media showing around 20 yellow tow trucks that appeared to be there to impound cars, although sources could not confirm this. But industry watchers say there have been signs of the company’s impending collapse for some time, with disgruntled workers filing complaints with the Dongguan government over withheld wages as early as April last year.

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However, the signs of unrest in the car market as a whole have been there for much longer. Sales grew rapidly between 2008 and 2016, but then climbed only fractionally to a peak of 24 million units before falling off – and this was well before Covid and the chip crisis took hold. Sales have had ups and downs in the years since, but the general trend is one of stagnation. Last year, people in China took delivery of 21.7 million cars.

One Yongao customer Bloomberg he spoke to had already taken delivery of his new Lynk & Co 03 before the collapse, but was still waiting for his dealer to sort the registration papers and pay the 14,000 yuan ($1,945) vehicle purchase tax owed on the car. Other customers are likely to be even less lucky, although state media say a task force has been set up to investigate the collapse and protect buyers who have already paid in full for the cars they are still waiting for.

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