Shell Car Review | The Largest Domestic Car Dealerships First Loss, 4S Stores Are No Longer "Passive Income" Businesses

In the past, the dealer system was the most stable link in China’s automotive industry chain. The announcement from Zhongsheng Holdings, the largest auto dealer group in China, has completely shattered this traditional impression.

Zhongsheng Holdings’ 2025 financial report shows its first loss since listing, with a net loss of about 1.9 billion yuan. Meanwhile, in 2024, Zhongsheng was still profitable with 3.2 billion yuan, so within a year, it shifted from profit to loss, with a gap of over 5 billion yuan. The biggest source of loss was new car sales, which lost over 3.7 billion yuan in 2025. Zhongsheng explained in its financial report that the prices of new cars were inverted, with manufacturer subsidies delayed, making it difficult to cover the difference between purchase and sale prices; price competition has always permeated the entire industry chain.

If this loss is simply attributed to price wars or market fluctuations, it clearly underestimates the complexity of the problem. Behind it are actually multiple factors, including structural adjustments.

Historically, the business model of 4S stores was based on “selling new cars at flat prices to drive volume, making money from finance and after-sales services,” using financial rebates and maintenance to offset the thin or even negative margins on new car sales. Automotive finance was once considered an important “buffer” for dealer losses on new car sales and a significant source of profit. However, as the automotive finance industry accelerates its compliance process, with strengthened regulation and increased consumer demand for transparency of costs, this “hidden profit” is rapidly shrinking. The single profit structure leaves dealers without effective hedging tools when facing pressure on new car sales.

Additionally, Zhongsheng’s 2025 losses are also a “side effect” of its aggressive expansion. In 2022, Zhongsheng Group acquired JLR (Jaguar Land Rover) at a high premium, aiming to strengthen its luxury car business. But in recent years, the traditional luxury car market has been impacted, and the stores acquired at high prices have become a financial burden. In 2025, goodwill and intangible asset impairments are expected not to exceed 2.5 billion yuan.

At its core, this is a reconstruction of the automotive distribution relationship. On one hand, automakers are strengthening control over terminal channels, with direct or quasi-direct sales models for new energy vehicles gradually becoming mainstream, with prices set and adjusted uniformly by manufacturers. In a highly transparent market environment, dealers have lost the profit margins they once enjoyed from information asymmetry.

On the other hand, changes in brand structure are also shaking the profit base of dealers. Previously, groups like Zhongsheng relied on traditional luxury brands for high margins. But as the pricing system of luxury cars loosens and high-end new energy brands divert market share, the premium ability of traditional luxury brands has significantly declined, impacting the profitability of dealer groups like Zhongsheng.

Zhongsheng’s situation is not unique in the automotive distribution industry. The “2025 National Auto Dealer Survival Status Survey” released by the China Automobile Dealers Association shows that 55.7% of dealers are in loss. The dealer group is undergoing a profound transformation. Zhongsheng’s losses reveal not just the struggles of a single company, but the collapse of the old logic that once sustained the entire industry, while also serving as a warning.

First, transformation is no longer an option but a matter of life and death. Currently, traditional luxury fuel vehicles still dominate Zhongsheng. Accelerating the transition to new energy and intelligentization is essential, with new energy channels, services, and profit models needing reconstruction. If expanding new energy stores is just a “rebranding” rather than a “capability upgrade,” it is merely drinking poison to quench thirst.

Second, the channel dividends for auto dealers are diminishing, and their channel resources are no longer rare.

Third, the marginal advantage of dealer scale is decreasing; “bigger” no longer necessarily means “more stable.”

Fourth, the role of dealers needs to be redefined. The future survival depends less on how many new cars are sold and more on how many users are retained.

It is foreseeable that the automotive distribution industry may enter a period of deep adjustment, with some inefficient and untransformable dealers facing elimination, and industry concentration likely to further increase. Meanwhile, new channel forms and service models will continue to emerge. In the future, auto dealers may no longer just “sell cars,” but more importantly, find their value within the automotive industry chain.

Beijing News Shell Finance Car Reviewer Wang Linlin

Editor Yang Juanjuan

Proofreader Liu Baoqing

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