In 2025, Chinese car dealers are facing tough times. A survey report shows that the new car business is consistently losing money, with over 80% of enterprises selling cars at a loss, and nearly 5000 4S stores are closing down. Analysis indicates that price wars among car manufacturers and the discontinuation of “financial rebates” are the main reasons behind these difficulties.
On Wednesday, the China Automobile Dealers Association released the “2025-2026 China Automobile Distribution Industry Development Report,” revealing that 55.7% of car dealerships in 2025 were operating at a loss. Nearly 5000 4S stores closed down, 81.9% of car dealerships experienced varying degrees of price inversion, and over half of dealerships failed to meet their annual sales targets.
4S stores integrate car sales, maintenance, parts, and information services. “Price inversion” refers to the situation where a dealership’s new car retail price is lower than the manufacturer’s wholesale price, resulting in losses for every car sold.
In terms of profit composition for dealerships, new cars, after-sales services, and financial insurance contributed -25.5%, 80.8%, and 24.3% of the profit, respectively, with new car sales losses continuing to expand.
A nationwide survey on the survival status of car dealerships was officially launched in early January 2026 and lasted for two months, covering more than 70 large and medium-sized car dealership groups with subsidiary 4S stores and over 200 small groups and standalone stores.
The report also indicates that 51.5% of car dealerships have price inversion rates exceeding 15%. Severe price inversion has led to exacerbating losses in new car sales for dealerships, eroding their profits. Dealerships have also widely reported significant financial pressures, high operating costs, inventory pressures, declining customer flow, and other issues.
Moreover, in 2025, car dealerships’ overall satisfaction score with manufacturers reached a historic low of 60.8. Dissatisfaction stems from factors such as overly high sales volume targets, price inversion, high inventory, high parts prices, forced selling, and excessive authorized network points in the same city.
Data from the China Industrial Research Institute on Wednesday, March 18, showed that in February 2026, the comprehensive inventory coefficient of Chinese car dealerships was 1.95, up 31.8% month-on-month and 21.1% year-on-year.
This coefficient measures the ratio of end-of-period inventory to current sales volume. A coefficient between 0.8 and 1.2 indicates a reasonable inventory level, above 1.5 signals a warning, and above 2.5 indicates extremely high risk, serving as a crucial indicator for evaluating the state of the automotive market.
An article from the official account of Fuzhou Che Wei Degree Media Technology Co., Ltd. on Tuesday, March 17, quoted a manager of an Audi dealership complaining to the media, “I haven’t had a weekend in two months, and we have meetings every day until three or four in the morning. The performance is poor, and the manufacturer keeps increasing our sales targets.” Another dealer expressed regret, “It’s too late to close the store now; I should have slapped myself earlier.”
Last week, China’s largest car dealership group, “Zhongsheng Holdings,” announced an anticipated loss of 2 billion Chinese Yuan in 2025, contrasting with a profit of 3.2 billion Yuan in 2024, illustrating the typical struggles faced by Chinese car dealerships.
Zhongsheng Group focuses on luxury and mid-to-high-end brands (such as Mercedes-Benz, Lexus, BMW, Audi, etc.) in sales and after-sales services, with luxury brand sales accounting for over 50%.
According to the “Market Pulse” data from the China Automobile Dealers Association in January 2026, the gross profit margin (GP1) for new car sales across the industry has dropped to -21.5%, meaning that dealerships are losing over one-fifth of the car price on average for each car sold. “Bare car sales” refer to the original selling price without any additional fees included.
For Zhongsheng Holdings, which primarily focuses on luxury brands, the situation is even more challenging, with the GP1 plunging to -26.2%, far exceeding the industry average loss level.
An analysis from Fuzhou Che Wei Degree Media Technology Co., Ltd. pointed out that this is not just Zhongsheng’s predicament but a collective crisis across the industry. Examining the financial statements reveals three detrimental factors affecting dealerships.
Firstly, the prolonged agony of “price wars.” In the current automotive market, competition is intense, with previously sought-after brands like Mercedes-Benz, Lexus, and BMW struggling to sell even with discounts, resulting in losses amounting to more than one-fifth of the car price for each sale. This relentless discount strategy has contributed to significant losses for dealerships.
Secondly, the halt in “financial rebates.” Apart from car sales, dealerships have traditionally relied on soft incomes like financial rebates (loan kickbacks) and insurance commissions. The slashing of these commissions by half has eliminated a crucial revenue stream used to offset losses from car sales.
A professional automotive website, “Gaishi Automobile,” highlighted that in the past, dealerships would earn around 15,000 Yuan from a 100,000 Yuan car loan, whereas now they only receive 5,000 Yuan, resulting in a two-thirds reduction in income.
Thirdly, the heavy blow of “intangible asset impairment.” As the overall environment worsens, the intangible assets accumulated by acquiring those stores in the past are now devalued, with Zhongsheng Holdings recognizing a one-time impairment loss of no more than 2.5 billion Yuan. This acknowledgment signifies that previously valuable stores have turned into liabilities.
In conclusion, Zhongsheng’s massive losses expose the industry’s vulnerabilities: relying on interest rate differentials and manufacturer rebates is no longer sustainable. The impacts of direct sales, the rise of new energy vehicles, intensified competition among existing stock, are compelling dealerships to shift from merely “selling cars” to focusing on providing services. However, this transformation is far from easy. For many dealerships, this winter may have only just begun.