Recently, news about "BYD Shandong Dealer Group Jinan Qiancheng Automobile Trading Co., Ltd. (hereinafter referred to as "Jinan Qiancheng") has funding problems" has attracted industry attention.

On May 28, BYD responded to the capital chain break of Shandong Dealer Group Jinan Qiancheng, denying the online rumor that "dealer policy adjustments have caused cash flow pressure", and attributed the problem to the dealer's "blind and rapid expansion and leveraged operation".

"The online information is not true! In the past few years, our policies for dealers have been continuous and stable. It is understood that the dealer group has problems with its capital chain due to blind and rapid expansion and leveraged operation. Since the end of last year, some of the dealer group's 4S stores have been acquired by other local dealers."

"We are also providing relief support to the dealer group and assisting the dealer group to properly handle related issues of its customers and employees." BYD emphasized.

But Jinan Qiancheng's announcement points directly to another pressure: BYD's "production-based sales" model requires dealers to bear high inventory pressure. This model is particularly fatal under the industry price war.

As early as a month ago, Jinan Qiancheng clearly attributed its financial difficulties to two major pressures in its "Solutions for Handling Three Guarantees Service Issues" announcement on April 17: 1) BYD's frequent dealer policy adjustments in the past two years have led to a sharp increase in its cash flow management pressure. 2) Multiple auto dealers in Shandong have collapsed, causing local banks to tighten credit and blocked financing channels.

Jinan Qiancheng promised to actively find ways to fulfill the corresponding service content and refund obligations in accordance with the contract signed with the car owner, and strive to solve the problem before the end of May 2025.

Behind the two sides' insistence is the cruel reality that more than 20 4S stores have stopped operating, more than 500 car owners' rights and interests have been damaged, and employees have no place to go.

"Expansion myth" collapses: Jinan Qiancheng's capital chain crisis has long shown signs

Jinan Qiancheng is not an ordinary dealer. Public information shows that this company, which has joined BYD's distribution system since 2014, has been ranked among the top 5 BYD dealers from 2018 to 2020. Jinan Qiancheng once claimed in its recruitment promotion that its Jinan Qiansheng is BYD's new image store "No. 1 in Greater China and the first flagship store in the country". Its business has expanded rapidly, radiating from Jinan to all parts of Shandong, and has established a network of more than 20 BYD 4S stores with an annual turnover of more than 3 billion yuan.

However, rapid expansion has buried hidden dangers. In April this year, Jinan Qiancheng publicly admitted for the first time that its capital chain was broken. The company once launched a prepaid service package (such as a 12,500 yuan "three-year full insurance + maintenance" package), which caused the rights and interests of more than 500 car owners to be damaged due to the closure of stores. What's more serious is that some car buyers who paid in full were unable to get their cars licensed because their vehicle certificates were mortgaged.

However, local dealers revealed: "Jinan Qiancheng's capital chain has been broken for a long time. At the Spring Auto Show in April this year, employees and suppliers went to the scene to defend their rights."

In addition, Tianyancha data shows that Qiancheng Group and its subsidiaries have recently been involved in many loan and financial leasing disputes, three of which will be heard in June-July this year.

Industry dilemma under price war: car dealers "sell more and more losses"

According to the "2024-2025 China Automobile Distribution Industry Development Report", by the end of 2024, the scale of the automobile 4S network will reach 32,878, a year-on-year decrease of about 2.7%, and the pace of network expansion will slow down. This is also the first negative growth since 2021, highlighting the challenges facing the industry.

According to the data of the China Automobile Dealers Association, the inventory warning index of Chinese automobile dealers in April 2025 was 59.8%, an increase of 0.4 percentage points year-on-year and 5.2 percentage points month-on-month. The inventory warning index is above the prosperity line, and the automobile distribution industry is in a recession.

In April this year, the total domestic channel inventory and manufacturer inventory of passenger cars increased by 50,000 vehicles (an increase of 40,000 vehicles in the same period last year). From January to April this year, the overall inventory of the industry increased by 120,000 vehicles (a decrease of 410,000 vehicles from January to April last year, a decrease of 150,000 vehicles in 2023, 100,000 vehicles in 2022, 660,000 vehicles in 2021, and 520,000 vehicles in 2020), which changed the characteristics of continuous inventory reduction from January to April in the past five years.

At the 2025 China Auto Dealers Conference held recently, Xiao Zhengsan, President of the China Automobile Dealers Association, said that in the first half of this year, the automobile market also showed the distinct characteristics of recovery growth, structural adjustment and profit pressure, just like the macro trend.

According to data from the National Bureau of Statistics and the Ministry of Finance, from January to April, the total retail sales of automobiles was 1,484 billion yuan, a year-on-year decrease of 0.5%. From January to March, the vehicle purchase tax was 50.6 billion yuan, a year-on-year decrease of 27.6%. According to the association data, from January to April, the retail sales of passenger cars was 6.872 million, a year-on-year increase of 7.9%, of which the retail sales of fuel vehicles was 3.549 million, a year-on-year decrease of 9.16%, and the retail sales of new energy vehicles was 3.323 million, a year-on-year increase of 35.7%, with a market penetration rate of 48.4%.

From the perspective of the circulation industry, the days of auto dealers are particularly difficult. Although the market sales have achieved growth and the marketing boom has been one after another, the monitoring data of the association show that the dealer inventory warning index is still 59.8%, and the inventory coefficient of some brands exceeds 2 months. Under the dual influence of the price war caused by the imbalance between supply and demand and the accelerated transformation of new energy, the terminal prices of dealers are inverted, the liquidity risk of funds has increased sharply, and the industry phenomenon of "the more you sell, the more you lose" has become the norm.

Xiao Zhengsan emphasized that behind the market recovery, the vast dealer group is experiencing an unprecedented stress test.

An industry veteran pointed out: "Many dealer groups have adopted a strategy of comprehensive operation of multiple businesses. However, BYD's dealer network has expanded rapidly, and the "price war" has intensified. In the main business segment, dealers need to bear the pressure of high inventory and low profits; in other business segments, dealers have failed to increase revenue, but have aggravated the tension of cash flow."

The automobile distribution industry is a capital-intensive industry, with a high proportion of private enterprises. According to industry insiders, dealers generally have a very high asset-liability ratio, and some have even achieved 80% or even 90% through various means. However, banking institutions generally give negative ratings to the dealer industry, resulting in difficult and expensive financing. Once the business fluctuates, financial institutions immediately withdraw loans and cut off loans, leaving the company "without the ability to turn around."

When car companies increase sales through promotions, inventory pressure eventually falls on the shoulders of dealers. In the context of the continuous decline in terminal profits caused by price wars, this pressure is enough to crush the capital chain.

The after-sales dilemma needs to be solved: Who will guarantee the rights and interests of customers and employees?

BYD stressed that it is providing relief support to the dealer group and assisting the dealer group to properly handle the relevant issues of its customers and employees.

However, it is still unknown whether the transfer of stores can solve the legacy issues. The protection of car owners' rights and interests involves complex legal and financial issues: How to recover prepaid fees? How to release the mortgaged vehicle certificates? How to define the quality responsibility after the after-sales service system is interrupted? All these require manufacturers to have more proactive bottom-up plans.

The way out of the crisis: Reshaping the manufacturer relationship and financial trust mechanism

In response to the industry dilemma, the All-China Federation of Industry and Commerce Automobile Dealers Chamber of Commerce put forward two key suggestions: 1) Automakers turn to the "production based on sales" model to reduce dealer inventory pressure; 2) Financial institutions adjust the risk assessment system for the automobile circulation industry to avoid "one-size-fits-all" loan withdrawal.

Xiao Zhengsan said: At present, automobile consumption has achieved phased results, but we should be soberly aware that the automobile industry is accelerating the changes in product structure, user demand and channel development. While the "hand-to-hand combat" of market competition is still ongoing, the elimination of automobile brand manufacturers and the circulation industry has entered a critical period. It is necessary to exert efforts from multiple aspects of policy, market and industry, and pay close attention to and do a good job in the following aspects: First, seize the opportunity and let the "combination punch" of incremental policies inject more momentum into the automobile market. Second, change with the trend, focus on new energy, used cars and digital transformation, and fully integrate into the process of value reconstruction of the automobile industry chain. Third, build a solid foundation and build a harmonious manufacturer relationship that adapts to the new development pattern of the automobile market.

This incident exposed three major responsibilities:

- Supply chain responsibility: Does the high inventory model conform to the concept of partner symbiosis? Automakers need to re-evaluate the dealers' ability to bear pressure and balance market share and channel health.

- Customer rights: The lack of prepaid supervision has led to the nakedness of consumer rights, and it is urgent to establish a fund custody or insurance mechanism.

- Industry ecology: Financial institutions' negative ratings of dealers have become a self-fulfilling prophecy, and a more scientific industry risk assessment model needs to be built.

BYD's proactive stepping forward to assist in relief reflects the company's responsibility and sets a positive example for the industry.

In response to recent public opinion, Li Yunfei, general manager of BYD Group's brand and public relations department, responded that he had seen a large number of articles, comments, and videos implying that BYD was "Evergrande in the auto industry"; overall, the assets and liabilities of China's mainstream auto companies are better than those of foreign auto companies, and there is no so-called "Evergrande in the auto industry" among China's mainstream auto companies.

This crisis will eventually pass, but it will leave deep reflections. Dealers need to strengthen their risk management capabilities, and auto companies need to take into account the health of the channel ecosystem when pursuing market share expansion to avoid excessively squeezing the living space of partners.

Author：Qinger