Dealers withdraw from Chery over integration instability

Sinotrust, a leading supplier of marketing and credit solutions in China, recently issued a report on dealer distribution networks, showing that the net withdrawal of Chery's dealers had reached 16 in the first quarter of this year.

Lou Tao, Sino's director of the auto marketing channel consulting department, said that the dealers' withdrawal was a result of Chery's two-year integration efforts and that integration is oftentimes accompanied by instability.

"We suffered losses last year. Seeing no sign of improvement, several shareholders decided to withdraw from the 4S store network. Chery has already ceased using our dealer distribution network. We are now selling cars of different brands," said a former investor of Chery in eastern China.

Sinotrust's report also shows that according to dealer distribution network statistics, the number of Chery's dealers fell to 16 in the first quarter of 2013 compared to the last quarter of 2012, as 27 dealers withdrew from Chery while 11 dealers joined the distribution network.　　

Chery's sales have continued to decrease. According to statistics from Gasgoo.com, an auto industry information website, Chery dropped to fifth place from the top among the list of Chinese brands. May sales for Chery totaled 31,100 units, down 35.1% compared to the same period last year. Between January and May this year, Chery sales came in at 196,000 units, down 13.7%. In 2012, Chery sold 563,300 units, a decrease of 12.4% from 2011.

Lou Tao said dealers may estimate future profits under the uncertainty triggered by integration. If they see slim hope in earning profits, dealers will withdraw from their distribution network and invest in other brands.

One of Chery's top 10 dealers said, "I had been selling Chery cars for years. However, several investors have left recently because you can't find the direction under so many changes. I'm planning to close two direct-sale stores. If Chery's two new products do not work well in the second half of 2013, I will close another agency."