Cars 'R' Them,or getting the hang of the sale

BEIJING -- Judging from the 800 cars from 60 different manufacturers sitting on the sprawling lot of the North Vehicle Distributing Market on Beijing's west side, Chinese auto dealers don't have to worry about inventory costs.

This 17-month-old outlet is one of the largest of its kind in a market that is just beginning to learn about marketing vehicles. A common refrain one hears from anyone involved in the Chinese auto market is that there must be more of a retail infrastructure in place if car sales are going to reach the 1.3 million units the government is predicting by the year 2000.

"Regard the customers as the God," preaches General Manager Yang Weichang in a promotional brochure commemorating the market's first anniversary. "With the support of all circles, a lot of profit have (sic) been achieved since we opened the door."

Mr. Yang was not available on the day we visited the dealership, but his deputy general managers were happy to answer questions.

In shortly more than a year, they sold 10,000 vehicles, or about 7.5% of all vehicles sold in Beijing last year. Gross revenues totaled 1.2 billion renminbi ($143.9 million). They choose not to say just how much profit was made, but they do collect administrative fees from each of the manufacturers. Despite the Beijing government's tight-money policy, designed to rein in inflation, and a $530-per-capita income for all of China, NVDM is poised for growth.

"To increase sales we have formed an automobile fan club," says Zhou Ming, one of the deputy managers. "There is no charge. So far, we have about 6,000 members. We send them a newsletter.

"If any of these members buy a car we will take care of getting their license. We'll give them discounts on spare parts. And they will be exempt from any inspection fees, which in Beijing can run about 200 renminbi ($24) a year."

Most of the 300,000 passenger cars sold in China last year went to government ministries or government-owned enterprises. An official in charge of purchasing places an order to a wholesale distributor, or even the assembly plant.

There's no demonstration of the car's features. Don't expect a complimentary cup of cappuccino. Mostly, vehicles are sold in China by taking orders.

"When I first came here in 1992 we had four major dealers," says Beijing Jeep Co. Ltd. President Franc J. Krebs. "The distribution methodology for us was to sell through these state-industry companies. They are basically trading companies. But we found we couldn't get the aggressive sales approach, so we started going to designed dealers and distributors in the provinces and cities and sub-dealers to them. We put in our own service centers."

Instead of floor-planning, the concept used in North American can auto retailing where after a designated period of 60 or 90 days the dealer pays interest on unsold vehicles, in China trading companies sign contracts, usually for six months, agreeing to purchase a certain number of vehicles based on what was sold in the last six months.

Then, at the end of the year, if a distributor has more than 10 days' supply he can't order more vehicles for the next six months. This became a problem at the end of 1995 when the government's restrictions on loans to government agencies and enterprises slowed vehicles sales significantly.

"What basically happened is they shut the plants down in December because everyone was trying to get their inventories down to zero," Mr. Krebs says.

If the North Vehicle Distributing Market is any indication, competition is still an embryonic concept. Many cars are caked in dust. Most lack wheel covers. There are no price stickers.

But there are more than a dozen stalls where customers sit down with representatives from various manufacturers to complete the paper work required before they can drive away. There also are 100 dormitory-style suites to temporarily house manufacturers' representatives and a restaurant for both sales and service personnel as well as customers.

"We try to improve our services all the time so we can gain customers through word of mouth," says Mr. Zhou.