(Yicai) Jan. 22 -- Chinese auto dealer Guangdong Yongao Investment Group, which owns more than 50 sales, spare parts, service, and survey stores, said the business is facing a crisis as a result of the shifting vehicle market and a lack of risk control.

Yongao made mistakes due to flaws in its management system, the Dongguan-based company said in a statement on Jan. 19, adding that it is taking steps to address the problems.

The situation is under control, Yongao pointed out, after it sought help from the authorities, which responded quickly, and took lawful steps to safeguard property. In the meantime, the affected car brands have started to become involved, it said.

Chinese auto dealers have seen their earnings collapse in recent years. Over half lost money in the first half of last year, with only 35 percent in profit and 14.5 percent breaking even, according to a report by the China Automobile Dealers Association.

“Although some new energy vehicle brands offer relatively higher commissions to resellers, not all shops are profitable,” CADA Deputy Secretary-General Lang Xuehong told Yicai. “Yongao sells a wide range of brands, profiting from some and suffering losses from others. Its broken capital chain indicates that the deficit makes up a larger share.”

Some carmakers voluntarily talked with banks and transferred vehicles to "safe" places, with plans to rapidly redeem auto certificates of qualification already pledged to lenders, Yicai found. Some also swiftly adjusted their strategy from reselling to a direct-sales model.

Established in 1997, Yongao mainly has stores in Guangzhou, Shenzhen, and other parts of the Pearl River Delta region, according to corporate information platform Qichacha. It resells more than 30 vehicle brands, mostly fuel cars.

Its statement came after Yicai reported last week that Yongao appeared to have gone out of business. Yicai visited Yongao outlets that sell vehicles of Dongfeng Honda Automobile, Lynk & Co., Aito, and GAC Aion, among other brands, and found that operations were suspended, no new models were available, and the firm had delayed paying its employees.

“The store was still operating on Jan. 16, but on the afternoon of the following day, a bank employee came to count the vehicles and had them towed away,” a salesperson told Yicai. Bank staff dispatched to the stores stopped customers from taking away cars, several salespeople added.

Editor: Martin Kadiev