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New rules will halve China’s dealers

China will have to halve its 30,000 dealerships as a result of new regulations coming into force on April 1, reports the Chinese business paper, The Standard.

The Chinese Commerce Ministry's rules on the management of franchise distribution, broadly modelled on Western systems enabling manufacturers to impose standards on their retailers, will require dealerships to be authorised by a manufacturer or authorised main distributor.

The distance between a dealership's business location, its components and parts suppliers and aftersales service points is required to be within 150 kilometres.

Unqualified car dealerships will have six months to comply with the new rules, but observers expect as many as half will fail to do so, partly for lack of funds to provide aftersales service.

According to the China Association of Automobile Manufacturers, only 2,000 of the 30,000 dealers currently registered by the government are authorised by manufacturers, and a third of them made losses in 2004 as the market slowed and became more price-competitive.

As part of reforms in the car market, Beijing will also issue rules governing used-car dealers that will clear the way for domestic and foreign investors to enter the sector.

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