Profitability drops to only 23.5%! Car dealerships face their darkest hour: Zhongsheng Yongda collectively shifts from profit to loss, with new energy vehicles becoming the key to breaking through the encirclement

Every Daily (Reporter) | Huang Xinxu    Every Daily (Editor) | Yu Tingting

“Selling cars is getting harder, and making money is even more of a luxury,” has become the most accurate description of survival in China’s automobile dealership industry today.

Recently, the China Association of Automobile Circulation has successively released the “2025 National Survey Report on the Survival Conditions of Automobile Dealers” (hereinafter referred to as the “Survival Report”) and the “2025–2026 Development Report on China’s Automobile Circulation Industry” (hereinafter referred to as the “Development Report”). The two key reports show that in 2025, the proportion of domestic automobile dealers that were profitable narrowed sharply from 39.3% in 2024 to 23.5%; the proportion that broke even was 20.8%; 55.7% fell into losses, and the loss ratio expanded compared with the same period of the previous year (41.7%). Meanwhile, by the end of 2025, the size of the 4S network for automobiles stood at 32,432 outlets, shrinking by 1.4% from the previous year, with the contraction rate lower than in the previous year.

Image source: China Association of Automobile Circulation reports

The latest batch of inventory pre-warning index for automobile dealers released by the China Association of Automobile Circulation further confirms the continuation of industry pressure. The data show that in February 2026, China’s automobile dealers’ inventory pre-warning index reached 56.2%, still staying above the breakeven-bust line. This means that the industry difficulties in China’s automobile circulation sector in 2025 have not been alleviated, and automobile dealers are facing unprecedented operating challenges.

Some listed dealership groups see a “major turnaround” in performance

In fact, some listed dealership groups saw a significant turnaround in their 2025 performance.

Zhongsheng Holding (00881.HK), the largest domestic automobile dealership group, recently issued a profit warning. According to the announcement, Zhongsheng Holding expects that in 2025, losses attributable to owners of the parent company will not exceed RMB 2 billion, while this figure was a profit of RMB 3.2 billion in 2024. Turning from profit to loss, the profit gap exceeds RMB 5 billion, marking its first annual loss in more than ten years since listing. Similarly, Yongda Automobile (03669.HK) also turned from profit to loss: in 2025, after adjustments, net losses attributable to the parent company are expected to be between RMB 300 million and RMB 330 million, breaking the profit situation of RMB 280 million in 2024.

Image source: Zhongsheng Holding announcement

At present, most listed automobile dealership groups have not yet disclosed their full-year 2025 performance, but judging from the performance of dealership groups that have already released their 2025 third-quarter reports, the industry is clearly under pressure. For example, Shanghai Wu Mao (600822.SH) recorded a net profit attributable to shareholders of RMB 19.7287 million in the first three quarters of 2025, down 56.91% year on year.

Sustained losses in new vehicle business are one of the major reasons dealers find themselves in a “losing money to earn applause” situation.

The “Survival Report” shows that, from the gross margin composition of dealers, gross margin contribution from new vehicles is -25.5%; after-sales services have become the most core profit support for dealers, with gross margin contribution reaching 80.8%; and financial insurance gross margin contribution is 24.3%. Affected by adjustments to commercial banks’ consumer finance products, gross margin in this segment fell sharply.

Under operating pressure, dealers’ sales completion is also not optimistic. In 2025, only 44.3% of dealers completed their annual sales targets, continuing the decline from 48.2% in 2024; more than half of the dealers “fell short” in sales performance assessments.

And the business reality of sales pressure and bleak profitability has further intensified the conflicts between some dealers and original equipment manufacturers (OEMs). In 2025, the overall satisfaction score of automobile dealers toward OEMs was 60.8 points, a historical low. Factors such as sales target indicators that are too high and price inversion, high inventory, over-priced parts, upselling, and too many authorized outlets within the same city—leading to intensified competition—are the main reasons dealers are dissatisfied.

New energy business is the key to breaking through

The “Survival Report” shows that in 2025, the situation where more than half of dealers lost money for the first time in many years emerged: 55.7% of businesses fell into losses, and the profitable segment dropped from 39.3% in 2024 to 23.5%.

Price inversion has become the “Sword of Damocles” hanging over the industry. In 2025, about 81.9% of dealers had price inversion. Among them, more than half of dealers had an inversion magnitude exceeding 15%, and losses on new cars begin as soon as they enter the showroom.

Image source: China Association of Automobile Circulation reports

However, new energy business is becoming the window for dealers to break through.

According to the “Development Report,” in 2025, China’s domestic automobile 4S network added nearly 5,000 outlets, of which new energy vehicle brands accounted for about 56%. In the newly added network, the share of independent brands reached 88%, while the shares of joint-venture brands and luxury brands were 7% and 5%, respectively. Lang Xuehong, Deputy Secretary-General of the China Association of Automobile Circulation, said: “Although the overall scale of the 4S network shrank, there is structural differentiation within it: the traditional fuel vehicle 4S network continues to contract, while the new energy 4S network maintains an expansion trend.”

In terms of performance, in 2025, the share of dealers or agents of new energy vehicle brands in the survey sample rose to 29.9%, up sharply from 16.8% in 2024. Their gross margin contribution from new vehicle sales reached 26.5%; the gross margin contributions from after-sales and financial insurance were 37.1% and 18.7%, respectively. Their operating performance was significantly better than the industry overall. Correspondingly, the gross margin from new vehicles for traditional fuel vehicle dealers was -31.1%.

Taking Zhongsheng Holding as an example, it is one of the dealership groups with the largest number of authorizations for Hongmeng Zhixing at present. “The Group’s new-vehicle sales volume increased slightly compared with 2024. The contribution of new energy brands to the business was strong. In addition, the Group’s after-sales service gross margin grew steadily, inventory levels were healthy, and cash inflows from operating activities increased. The Board believes that the Group’s overall operating and financial conditions are sound.” Zhongsheng Holding stated in the announcement.

Entering 2026, although the auto market has received policy tailwinds such as subsidies for trading in old vehicles for new ones, which brings new support for releasing consumer demand, the pains of industry transformation are still ongoing. The “Survival Report” shows that for the outlook of the 2026 passenger car market, dealers are generally cautious and conservative; more than half of dealers are even more conservative than last year. Only 23.4% of dealers believe the market will grow year on year, while 31.6% of dealers expect the market to remain on par with the previous year.

Cover image source: Every Daily media database

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