Chery shuts once-top Beijing outlet

According to media reports, domestic brands including Lifan and Chang'an pulled out of Race Course Auto Mall in downtown Guangzhou due to poor sales and high rents.

Blind expansion in big cities also led to shuttering of dealerships.

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Shenzhen-based carmaker BYD had 26 outlets in Shanghai at their peak in 2009 and 2010, a number close to joint venture giants Shanghai GM and Shanghai Volkswagen based in the city.

The strategy helped BYD when the market was surging, but as it cooled many of BYD dealers struggled to survive.

Today the carmaker has 14 dealerships left in Shanghai, said one of its dealers in the city.

A sales chief at a domestic carmaker told China Business News that first-tier cities had big markets and status that help improve a brand image, so Chinese brands felt they must have a presence. But high rents and other costs made it very difficult for them to make a profit.

"Carmakers should have a clear understanding of the market in big cities instead of rushing in for expansion," the executive said.

When the close of Chery's dealership became a hot topic in the media, a spokesman for Chery told the Beijing Morning Post that it is a "proactive adjustment" of the company's sales network.

Chery still has 13 stores in Beijing, which is a "more reasonable layout", he said.

Luo Lei, deputy secretary-general of the China Automobile Dealers Association, said the closure is "very normal".

Sino-foreign joint ventures Guangqi Honda and Chang'an Ford have also closed dealerships in Beijing, he said.

Yet Luo noted that domestic car sales in Beijing did fall significantly in the wake of limits on car purchases. He added that "a clear consumption ladder" has taken shape.

It is easier for domestic brands to sell their low-priced vehicles in third and fourth tier markets, he said.

Statistics from China Association of Automobile Manufacturers show that domestic carmakers sold 580,000 passenger vehicles in May, 36.5 percent of the total in the country.

The market share for domestic passenger vehicles has declined for nine consecutive months since September last year, ending the period 2.92 percentage points lower than the same period last year.

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