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    China’s car dealers feel life-threatening squeeze from price war, e-commerce rivals

    Chinese car dealers, once the beneficiaries of the country’s booming automotive market, are facing a bleak future as they fall victim to a brutal price war and a growing preference for e-commerce sales among manufacturers and shoppers.

    The industry’s 14 major participants reported a 10 per cent sales slump in the first half of 2025, following an 18 per cent year-on-year decline in 2024, according to data from the China Passenger Car Association (CPCA).

    Cui Dongshu, general secretary of the government-backed industry consortium, said most of the dealers were unable to generate positive cash flow as they ran at huge losses.

    The CPCA’s findings echoed a bearish forecast by the China Automobile Dealers Association (CADA) at the end of last year. The Beijing-based association said in a report that many of its members would turn from profit generators into corporate failures in two years.

    China is home to about 30,000 car dealers, which also engage in after-sales service, supply of spare parts and brokering of auto insurance sales.

    The number of car dealers jumped since 2009 when mainland China surpassed the US as the world’s largest automotive market. Their fortunes began to sour in 2018 as more electric vehicle (EV) makers turned to e-commerce platforms to sell their cars, bypassing dealerships.

    CPCA data showed that the EV adoption rate on the mainland stood at 50.2 per cent in the first half of 2025.

    Over the past two years, a discount war among car manufacturers exacerbated the poor earnings outlook for dealers, forcing more than 10 per cent of them to shut down, the CADA said in the report.

    Mainland car dealers typically need to pay catalogue prices to car manufacturers or assemblers to build their inventory, so discounts can force them to sell cars to consumers below cost.

    The average discount on mainland EVs and petrol cars hit a record 17.4 per cent in June, according to JPMorgan’s data that covered 40 foreign and Chinese car brands across 1,000 variants, including imports.

    “The [dealer] industry will see a big structural change since market demand no longer supports their business model,” said Nick Lai, head of auto research in Asia-Pacific at JPMorgan. “Many car dealers are in a difficult situation and are unlikely to see a turnaround in the future.”

    Average net margins for the mainland’s car dealers dropped to negative 2 per cent this year, from 2 per cent in 2019, according to the CPCA.

    The 14 largest dealers, including Zhongsheng Group and Yongda Automobile Services, reported a combined net loss of 3.6 billion yuan (US$5.06 billion) in the first six months of 2025, it added. In 2024, their total loss was 100 million yuan.

    “Most small companies cannot survive even after we cut labour and rental costs,” said Cao Hui, a manager with Wantu Auto Service in Shanghai. “It is true that things will get even worse in the next one or two years.”

    China Grand Automotive Service, the nation’s second-largest dealer with more than 730 outlets, was delisted from the Shanghai Stock Exchange in August after its shares slipped below the par value of 1 yuan for 20 consecutive days. Pang Da Automobile Trade became the first in the industry to collapse in June 2023.

    Early this year, Beijing stepped in to supervise the market amid worries that escalating price ­competition would undermine the automotive industry’s growth, which has been a bright spot in the mainland economy.

    In late May, the Ministry of Industry and Information Technology warned that carmakers initiating price cuts would face penalties, although it did not mention specific measures.
    Source: scmp