In recent times, a wave of closures has hit car dealerships (known as 4S stores) across China. In just the first half of this year, nearly 2,000 4S stores nationwide have shut down. Analysts attribute this trend to the economic downturn, resulting in a decrease in sales of luxury cars and putting 4S stores under strain, leading to more closures especially among mid-to-high-end car dealerships.
On November 12th, both the Audi and Red Flag 4S stores under the Tianjin Yonghao Group closed their doors. The notice from Yonghao Audi 4S store cited a sudden withdrawal of credit by a longstanding banking partner, causing a disruption in the store’s cash flow and resulting in the temporary suspension of new car sales and after-sales services. The store is currently seeking solutions and pledged to provide answers by December 12th.
On the same day, numerous car owners arrived at these stores seeking resolution, only to find the showroom deserted with no sales personnel. The next day, all display cars in the showroom had been removed, along with promotional TVs, leaving the entire space empty.
One of the affected car owners, Ms. Li, expressed that there was no prior notice given about the closure, and unresolved matters for customers were left unaddressed. She further mentioned that the closure seemed planned as customers were left stranded without any point of contact, and even the store’s service network was inaccessible. Attempts to reach customer service through their official channels proved futile with automated responses redirecting concerns.
According to records, the Tianjin Yonghao Audi 4S store was established in 2009 with a registered capital of 30 million yuan and a total investment of 175 million yuan. Spanning an area of 18,000 square meters, including a 3,000 square meter sales showroom, it was the largest Audi 4S store in Tianjin.
Simultaneously with the announcement of the closure of the Audi store, the Yonghao Red Flag 4S store in Tianjin also declared its cessation of operations. Several months’ worth of wages were unpaid to the seventy to eighty remaining employees, all currently seeking legal recourse. Some employees mentioned difficulties in resigning unless they agreed not to claim any pending wages owed to them.
As these closures unfolded, car owners reported difficulties in contacting the sales hotline of Tianjin Yonghao Dongfeng Honda 4S store, leaving around a thousand car owners in distress with collective losses exceeding millions of yuan.
Prior to these incidents, two Buick 4S stores in Tianjin had also closed – Xinmaotian Buick 4S store in Xiqing Zhongbei Town which closed early in November and Kuaijieli Buick 4S store in Tianjin Airport Hu Yi which closed back in September. The sudden closures left over a hundred Buick car owners grappling with significant financial losses due to the inability to access “dual insurance” services provided by the closed down 4S stores.
Last month marked the closure of the world’s first 5S BMW store – Beijing Xindebao Auto Sales Service Co., Ltd. (“Beijing Xindebao”).
On October 23rd, a notice outside Xindebao highlighted the severe financial pressures the company faced. To safeguard customer and employee interests, the group was actively seeking funding injections or alternative management solutions to alleviate the current crisis. The BMW brand authorization had been terminated since October 20, 2024, leading to the temporary suspension of new car sales and after-sales services.
Records reflected that BMW is the first car brand to introduce the 5S concept in the industry, with Beijing Xindebao as the inaugural 5S dealer. Established in 2010 and situated in Beijing’s Chaoyang District, Dongwuhuan Pingfang Bridge, the dealership spanned 28,000 square meters, with the addition of sustainability to the conventional 4S model.
Joining the league of closures, the Cadillac 4S store in Beijing found itself unable to sustain operations as Beijing Huijing Koman Cadillac 4S store closed officially on September 30th, citing poor management as the reason for the closure. Positioned conveniently in Fengtai District, Beijing, the store faced challenges in servicing customers and ceased operations abruptly, affecting access to car purchases and maintenance services for patrons.
Closing in on the scene, multiple 4S stores in Chongqing under Guanghui Auto Group witnessed shutdowns with at least three stores ceasing operations. Similarly, several Jateli 4S stores in Chongqing had to close down, adding to the growing number of closures in the automotive industry.
Located in Chongqing’s Liangjiang New Area Automobile Expo Zone, the Chevrolet 4S store shut its doors at the end of September, submitting a request to SAIC General Motors for deregistration due to severe operational difficulties.
At the beginning of the year, Guangdong Yongao Investment Group suddenly shuttered over 80 car brand shops overnight, leaving showrooms and warehouses emptied. The agency represented various car brands including Wankai, Audi, Volkswagen, Mercedes-Benz, BMW, Land Rover, Jeep, and Rolls-Royce, among others.
Yao Xianbin (pseudonym), a former employee at a 4S store, lamented, “The era of 4S stores is over; they are collapsing en masse. The company still owes me five months’ salary, with some employees owed up to seven months. Previously, 4S stores were hugely profitable, offering a one-stop service for clients to select and purchase vehicles, as well as providing film protection and maintenance services. Both the company and its employees would prosper as a result, with many 4S stores eventually going public, and their executives amassing fortunes.”
He emphasized, “The golden age of 4S stores is a bygone era. Dealerships are facing a harsh reality of closures and financial scandals. The most unfortunate are those car owners who paid substantial sums but now find themselves stranded without formally issued license plates, rendering their newly purchased cars unusable, turning their dream cars into nightmares. Currently, both car owners and employees are struggling to secure their rights, as we approach the year-end, leaving many in dire straits.”
Amid staggering data, closures of traditional auto 4S stores have become a prevailing trend in the industry. According to the China Automobile Dealers Association, over the past four years, more than 8,000 4S stores have ceased operations.
The years 2020 to 2022 witnessed over 5,500 4S stores exiting the network, with specific figures for China reflecting 2,362 closures in 2020, 1,400 closures in 2021, and 1,757 closures in 2022. Data from Autohome indicated that in 2023, the number of closures surged to over 2,540, marking a new high in China’s auto market history. By the first half of this year, nearly 2,000 additional 4S stores had closed their doors.
Tian Xie, a Marketing Professor at the Moore School of Business, University of South Carolina, and the John A. Palmer Endowed Professor, shared with Epoch Times, “With the economic downturn and anti-corruption campaigns, luxury car sales have declined, impacting the performance of these 4S and 5S stores. Given the high leverage rates, many of these dealerships are unable to sustain themselves and are closing shop. Subsequently, even more mid-to-high-end dealerships are expected to follow suit.”