Over Half of 4S Dealers in the Red as Auto Distribution Industry Grapples with Price War

According to the latest report from the China Automobile Dealers Association (CADA), over 50% of 4S dealerships in China were operating at a loss in 2025, an increase of 14 percentage points year-over-year. A staggering 81.9% of dealers experienced price inversions—where wholesale prices exceed retail prices—with more than half suffering inversions exceeding 15%. As a result, the gross profit margin on new vehicle sales plummeted to -21.5%, and for luxury brands, it dropped even further to -26.2%. To meet automakers’ aggressive sales targets, dealers have been commonly selling vehicles at a loss. Compounding the pressure, finance commissions have been halved, and rebate payment cycles extended, pushing new-car operations deep into negative gross margins. Currently, after-sales services—including maintenance and insurance/financial products—have become the primary profit drivers, contributing gross margins of 80.8% and 24.3%, respectively. However, reduced maintenance needs for new energy vehicles (NEVs) and the rise of independent, chain-style after-sales service providers are making it increasingly difficult for traditional dealers to offset losses from new-car sales through after-sales revenue. Further exacerbating financial strain are high inventory levels (the Inventory Warning Index stood at 56.2% in February), elevated parts costs, and intense intra-city competition. In response, the government has introduced regulatory measures such as the "60-day payment term" rule. The industry is now urging automakers to abandon their singular focus on sales volume and instead support dealers in transitioning toward full-lifecycle customer services and exploring new cooperative models with NEV brands.