Sohu View: Behind Saab, Pang Qinghua's Ambitions and Worries

　　Introduction of the section

　　Sohu View is a reviews section originated from the former Sohu Reviews. Based on hot issues concerning auto industry each week, the new section is supposed to represent own voice and views of Sohu Auto. You can read Sohu View every Friday.

　　Subaru to be made in China, Pangda may lose dealership

　　It was known to all that Subaru had been seeking to build a joint venture in China, and media reported Subaru would build a joint venture with Chery Auto last year. During last year Pangda Automobile Trade Co once planned to cooperate with BAIC to make Subaru vehicles in China. Recently, Pangda Automobile Trade Co and Saab reached a deal to build a tripartite joint venture in China, which was exactly the same as the previous rumor, though Pang Qinghua never admitted it.

　　Why Pangda is so interested in making vehicles? Does Pang Qinghua want to be the second Li Shufu? The answer is no. Pang Qinghua is worried that if Subaru successfully be built in China, Pangda will lose the exclusive dealership of Subaru brand.

　　Currently, Zhongji Subaru Vehicle Sales Co belonging to Pangda is the largest dealer of Subaru brand in China. Sales of Zhongji Subaru Vehicle Sales Co accounts for 70 percent of total sales of Subaru brand in China, which is also the best business with the highest profit for Pangda Automobile Trade Co.

　　Models of Subaru brand are not rich, and its import business will shrink inevitably so as to support domestic production. Moreover, in order to prevent dealers from excessive power, Chery is likely to rebuild the domestic distribution channels of Subaru. For Automobile Trade Co, the best result is: Chery will still sell Subaru vehicles through distribution channels of imported Subaru vehicles if it wants to save construction costs of distribution channels. However, as for Pangda Automobile Trade Co, its current exclusive dealership of Subaru brand may be canceled, and its famous "Subaru model"(combination of wholesale and retail) will subsequently be overturned.

　　Partnership with Saab, Pangda Automobile Trade Co can get new sales resources

　　Subaru is extremely important for Pangda Automobile Trade Co. Pang Qinghua separated resources of Pangda Automobile Trade Co into three categories. According to him, commercial vehicles have the highest sales, sedans have the largest sales volume, and imported vehicles have the highest profit. Therefore, considering that Pangda Automobile Trade Co has invested a lot in developing Subaru brand in China, it doesn't want to part the company with Subaru. This is why Pangda Automobile Trade Co actively participated in domestic production of Subaru. After failed to buy into domestic production of Subaru, Pangda Automobile Trade Co hoped to find an alternative brand in order to insure against the possible risks. Then, Saab emerged.

　　People's first response to dealers involved in vehicle manufacturing is that ambition of them is so great. In other words, dealers are not satisfied with lower profits, because they hope to cover the whole industrial chain, ranging from dealership to vehicle manufacturing. But actually the fact is as a businessman, Pang Qinghua is not so crazy for industrial manufacturing, though he has been in many industries.

　　In order to keep exclusive sales resources, Pang Qinghua actively participated in domestic production of Subaru and cooperation with Saab. Through the cooperation with Spyker, Pangda Automobile Trade Co not only can get stake in a joint venture built with Saab, but also can establish a 50-50 joint venture sales company. As a result, Pangda Automobile Trade Co can get exclusive dealership of Saab basically. Even if the above two plans couldn't get government approval, Pangda Automobile Trade Co still could purchase 45 million euros of Saab vehicles so that sell them in China as imported vehicles. This is the resource other dealers do not have, which is also consistent with business strategy adopted by Pang Qinghua. Moreover, according to Pang Qinghua, brand familiarity of Saab in China is better than that of the original Subaru in China. Therefore, it is not difficult to sell Saab in China.

　　Competing for the right to speak

　　In general, for dealers, the operational risk lies in liquidity. But capital will not be the biggest problem if dealers can implement good business methods and broaden the financing channels. Pang Qinghua is worried about the exclusive sales resources. The previous version of Administration of Automobile Brand Sales Implementing Procedures issued in 2005 was criticized because it put dealers in the status of absolute subordination. Because Administration of Automobile Brand Sales Implementing Procedures gave carmakers the privilege of absolute monopoly, many carmakers forced dealers to invest tens of million yuan to build shops and pay high margin by the means of threatening to cancel dealership.

　　Dealers will be deprived of the dealership if they can't reach carmakers' expected sales, leading to tens of millions of investment in vain. Therefore, like LSHM buying into Mercedes-Benz China, Pang Qinghua tried his best to be a shareholder of carmakers. By doing that can Pangda get information of carmakers as soon as possible and have the right to speak.

　　On the other hand, OEMs are also worried about losing control over channels, so some of them plan to establish their own direct-sale store system. Media disclosed that Toyota Tsusho Corporation had bought stake or controlled most dealers of FAW-Toyota and Guangzhou-Toyota. In addition, Toyota Tsusho Corporation even led secret acquisition of some unsustainable Toyota dealers, and these Toyota dealers finally became direct-sale stores of Toyota.

　　Currently, the imbalance between carmakers and dealers has become one of the most difficult conflicts to resolve in China's automotive industry. In fact, the relationship between carmakers and dealers is not much rigid. The best way is to establish a reasonable consultation mechanism so that the relationship between carmakers and dealers can be harmonious.

　　With the emergence of large dealer groups in recent years, some second-tier brands have begun to expand network so as to draw some large dealers. For example, last week Haima signed an exclusive sales agreement with Pangda Automobile Trade Co to sell HAPPIN in North China.  

　　According to the China Automobile Dealers Association, the new version of Administration of Automobile Brand Sales Implementing Procedures has revised terms about the period of authorized dealers and cooperation between carmakers and dealers. (Translator: Qinghua/Wade)

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