China Grand Automotive Service, the mainland’s second-largest car dealer in terms of sales, is set to be expelled from the Shanghai Stock Exchange after its shares traded below their par value for 20 consecutive days, the latest sign of cracks appearing in the world’s largest vehicle market.
The Shanghai-based company plunged by the 10 per cent daily trading limit on Tuesday, ending at 0.87 yuan (12 US cents). It was the 19th trading session in a row that Grand Automotive saw its shares crash below the 1 yuan threshold.
Even if it were to jump by the daily trading cap of 10 per cent on Wednesday, it would not be able to break through the 1 yuan mark. According to exchange rules, a stock has to terminate trading and face delisting after its shares trade below the 1 yuan face value for 20 straight days.
“The company’s shares are being snubbed by investors, which reflects their bearish view about the business outlook for car dealers,” said Ding Haifeng, a consultant at Shanghai-based financial advisory firm Integrity. “Increasing electric vehicle (EV) adoption, new sales models and intensified competition make it extremely difficult for distributors of petrol cars to survive.”
Grand Automotive would become the second car dealer to be disqualified from the bourse in about a year, following the delisting of Pang Da Automobile Trade in June, 2023.
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‘Overtaking on a bend’: how China’s EV industry charged ahead to dominate the global market
‘Overtaking on a bend’: how China’s EV industry charged ahead to dominate the global market
Through more than 730 outlets across the country, it sells premium cars under brands such as BMW, Audi and Volvo.
In 2023, Grand Automotive, which is controlled by Xinjiang Guanghui Industry Investment Group, reported deliveries of 713,500 vehicles, which raked in 138 billion yuan. It trailed only Zhongsheng Group Holdings in terms of sales.
The car dealer posted a net profit of 392 million yuan last year, a turnaround from a net loss of 2.66 billion yuan in 2022.
As of Tuesday, Grand Automotive was valued at 7.2 billion yuan based on the closing price of 0.87 yuan.
Electric vehicle penetration in China, the world’s largest automotive and electric car market, has surged to 40 per cent from about 1 per cent a decade ago as millions of petrol vehicles are replaced by battery-powered vehicles featuring autonomous driving technology and digital cockpits.
At present most EV brands, from Tesla to start-ups like Nio and Xpeng, build and run their own sales networks by using e-commerce platforms to woo young customers.
China’s automotive sector, which is mired in overcapacity woes, is facing an uphill battle to improve profitability amid an escalating price war.
Among the top players, only BYD, the world’s bestselling EV maker, and Li Auto, a direct rival to Tesla on the mainland, have reported profits so far this year.
In April, Goldman Sachs predicted in a research report that another cut of 10,300 yuan per vehicle by BYD, or 7 per cent of the company’s average selling price, could drive the nation’s EV industry into losses this year.
Cui Dongshu, general secretary of the China Passenger Car Association, said in February that most mainland carmakers were likely to continue offering discounts to retain market share.
