Service StationZhangjiagang0314

FAW Zhangjiagang Service Station INTERVIEW DATE:March 14th, 2000INTERVIEWER NAME:Anne WangInterviewee NameMr. Chang Zhenxin, Mr. GuPositionDirectors Company and AddressNo. 1 Luyang Rd., Zhangjiagang 215600Telephone/Fax(0520) 8682025BackgroundKey IssuesConclusionsBackgroundn Zhangjiagang Service Station is the only FAW truck service station in Zhangjiagang City. n Zhangjiagang Service Station belongs to local Police Bureau. Mr. Chang is the new director of the station. Hed been a police officer for twenty years.n Zhangjiagang service station is established in 1994. Its location is near the National highway of Zhangjiagang City. Currently its still a state-run company. Service area of the station covers Zhangjiagang City and Jinan City.n There are totally 30 employees in Zhangjiagang Service Station.n Zhangjiagang Service Station sells a lot of trucks besides its service business- Income from Servicing1Million RMB 50% warranty services 50% out-of-warranty- Income from spare part sells3Million RMB- Truck sales360 trucksn Inventory value of Zhangjiagang Service Station is around 800,000RMB with 600-700 SKU.Key Issuesn There is around 200,000-RMB-worth Model-141 parts. Those parts are hard to sell and considered as potential obsolescence. The service station is planning to write them off gradually in several years.n Price of spare parts centre is too high for the service station to accept and compete with market price. As the income of warranty service is realised through parts, Zhangjiagang Service Station has to buy large portion of parts from the FAW parts center.n The hourly charge in Zhangjiagang City is set at 8RMB per hour, which is lower than FAW price. Even this price is challenged by small service stations.n Retail pricing is lower in recent years. The service station could price 16% higher than purchase price couple years before, but now they can only price a 10-12% margin.n Supply of parts from parts centre is not enough. When there is a new truck model, supply of parts is always lag behind. When users comes to service station for repair, service stations is unable to provide the corresponding parts.n Though Zhangjiagang Service Station sold a lot of trucks last year (total revenue reached 30 Million RMB), net profit is zeor in year-end. Most of the profit comes to tax, and Mr. Zhang claimed that there is some "financial problems" inside.n Most of the technicians are recruited outside and not trained specifically for FAW trucks, especially the new truck models.Conclusion Zhangjiagang Service Station is a big second layer dealer with 3 in 1 capabilities. Though sales performance last year is good, net profit still goes to zero, indicates the existence of some internal financial problems. 2