Auto Industry

Changing lanes

Austerity drive slows Aston Martin dealers down

AstonMartin w

A brand with royal connections

The last time that auto distributor Pang Da made headlines was in 2011 when it put in a $131 million bid for the ailing carmaker Saab. It called off the deal after a Swedish court declared Saab bankrupt. Saab’s assets were later bought out of bankruptcy by China-backed energy firm National Electric Vehicle Sweden (a shortage of cash then stopped NEVS from making cars, although it won creditor protection in Sweden in August so it could seek new funds).

In September Pang Da was back in the news, after it announced that it has disposed of its stakes in six underperforming sales companies. Among them, five are dealerships for Aston Martin in Shenzhen, Guangzhou, Ordos, Shenyang and Xi’an.

Pang Da said as of the end of August, the five units have run up balance sheet losses of Rmb21.6 million ($3.5 million). Pang Da will sell the dealerships to a Guangxi-based trading firm for about Rmb80 million, the company said in a regulatory statement.

Luxury carmakers have been hit hard by the government’s anti-graft and anti-extravagance drives, with businessmen trading in their flashier sports car for more low-key vehicles in an effort to keep a lower profile, said Time Weekly.

“After all, Aston Martin is an ultra-luxury sports car brand. So dealers selling this brand might want to change their strategy” was the verdict from the China Automobile Dealers Association’s Luo Lei.

Another car dealer agreed that the higher end of the market is facing tougher times than most. “You probably won’t believe this, but of all the luxury car labels I distribute, the least profitable is Lamborghini,” he told Time Weekly, predicting that luxury labels like Aston Martin and Lamborghini will downsize in China soon.

In March this year Ferrari terminated sales agreements with several of its dealers in China, says Beijing Business Today, which also reckons that the Italian car brand is trying to slim down its commercial operations further because of slowing sales.

China Auto News notes that several dealers for Porsche, which cites China as its second largest market after the US, are also complaining about the slowdown.

Still, industry insiders say some of Aston Martin’s problems are of its own making. One reason that Porsche has done better than many of its peers is because its Cayenne model has tapped into the popularity of sports utility vehicles (Porsche sells more Cayennes in China than anywhere else in the world). Aston Martin has stuck to making sports cars, despite announcing a plan for its first four-door sedan back in 2009. It remains to be seen when this model will be introduced in China.

Earlier this year, the company ran into flak in the local media, too, after appearing to blame a Chinese supplier for a recall of more than 17,000 of its cars around the world.

“Aston Martin’s latest recall again passed the buck for poor quality of products, but this time ‘Made in China’ is just the scapegoat of the glorious carmaker,” thundered Xinhua, in a report headlined, “Aston Martin plays ‘Made in China’ blame game”.

Pang Da got its start in car retailing by selling Subaru cars, a mid-tier Japanese brand. It only acquired the distribution rights to Aston Martin in 2011, and commentators have wondered whether the two companies are a good fit.

“The sale is likely related to Pang Da’s strategic adjustment, as it has always based its business model on more medium-tier car brands. Although it is also engaged in sales of some luxury brands, it is lacking in relevant experience,” Luo told Time Weekly.

Relatively late to the China market – it entered in 2008 compared with Porsche in 2001 – Aston Martin has high hopes for sales there, forecasting that China will become its third largest market after the US and the UK, and contributing 20% of its revenues by the end of this year. At the moment, China makes up just 5% of Aston Martin’s sales globally, NetEase Auto has reported.

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