Wuhan, Hubei province-based car dealers accelerate expansion in second- and third-tier markets
Many Wuhan, Hubei province-based car dealers have opted to accelerate their expansion in the second- and third-tier markets as a strategy for increasing sales.
Benefiting from China’s automotive stimulus package, the under-serviced second- and third-tier markets boast huge potential. The tax concession for vehicles with a displacement of 1.6 liters or less has given car sales a major boost. The RMB5 billion ($730 million) automobile subsidy program for rural areas further expands the stimulus to China’s countryside.
In addition to the huge market potential, pressures from the automakers themselves combined with the relative saturation of the urban markets are driving city car dealers to accelerate expansion into rural areas. BYD Auto, one of the Chinese automakers that pioneered the second- and third-tier markets, has been the largest beneficiary. Anhui province-based Chery Automobile extended its sales outlets in the second- and third-tier markets to more than 300 in 2009. Sales volume in the second- and third-tier markets for Geely, another leading Chinese automaker, accounted for 40 percent of the group’s domestic sales. Dealers, in turn, are also speeding up their expansion in the second- and third-tier markets to align with the automakers’ strategies.
Wuhan-based Hubei Junma Automobile Trading plans to invest RMB200 million to build an automobile industrial park in Xiaogan, Hubei province, and open twelve 4S stores and 20 urban terminals, while its headquarters in Wuhan has dealerships for only two brands.
Statistics show that sales volumes in second- and third-tier markets increased 41 percent and 51 percent in the first nine months of 2009 respectively. Jianyin Car, a Hubei province-based car dealer with sales outlets in almost all of the medium-sized and small cities across the province, sold over 1,000 cars in the second- and third tier markets in 2009, accounting for 25 percent of the group’s total sales volume.
Car dealers plan to carry out varying management and marketing models in different markets and the diversified business model will also be helpful in reducing operating risks. Wuhan-based car dealers are expected to achieve greater success in the second- and third-tier markets in 2010.
