Profits Suffering at Chinese Car Dealership
Watch the video with Andrew Stotz or read a summary of World Class Benchmarking on Zhongsheng Group Holdings Limited.
Background
Zhongsheng Group Holdings Limited is a leading automobile retailer in China.
The group distributes luxury and mid-tier automobiles from well-known brands.
The company has more than 200 dealerships in over 70 cities in 20 provinces.
Zhongsheng was the first to have dealership rights for Toyota and one of the first dealerships for Lexus and Audi in China.
Business Description
Zhongsheng distributes luxury and mid-tier foreign automobile brands across China, through around 240 dealerships.
Its luxury brands include Mercedes-Benz, Lexus, Audi, Porsche, BMW and Land Rover and its mid-tier brands include Volkswagen, Toyota, Nissan and Chrysler.
The company also operates after-sales businesses that offer spare parts, accessories, repairs and maintenance services and other automobile related services.
Most of the group’s luxury dealerships are located in the Eastern and Central China regions and the majority of mid-tier dealerships are in the Southwestern and Northwestern inland regions. Mainland China accounts for more than 90% of sales.
With more than 15,000 employees, the company ranks fourth among the top 100 automobile dealer groups in China, in terms of sales, according to the China Automobile Dealers’ Association.
Leadership
Yi Huang, co-founder and chairman, is in charge of long-term strategy at Zhongsheng. He sits on Chinese dealer councils for both Lexus and Toyota.
CEO Guoqiang Li, another co-founder, is in charge of daily management of the dealership chain. He has not been able to raise Zhongsheng’s competitive profitability during the last five years, though growth has recently ticked up.
World Class Benchmarking
Profitable Growth has remained poor for years and now ranks at #8.
Zhongsheng is ranked among the worst 372 of 1,240 large Consumer Discretionary companies.
Profitability is poorly ranked at #8, but Growth jumped to #2 from #9 in the past 12 months. However, Growth’s improvement seems to have had little effect on the top line Profitable Growth.
Asset utilization is good at #3, but the poor Profit margin drags on Profitability.
Sales growth has improved since 2014, and Margin Change improved to #4 in the past year as well.
Check out Learning Valuation: Zhongsheng Group Holdings
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