In recent years, China’s auto market has experienced a transformation from rapid growth to stock competition.New energy vehiclesThe rise of the industry has further exacerbated the industry reshuffle. However, in this change, car dealers, as a key link connecting OEMs and consumers, are under tremendous operating pressure.
Recently, the Shanghai Automobile Sales Industry Association and other four associations jointly issued the “Letter on Urging OEMs to Improve the Business Dilemma of Automobile Dealers in the Yangtze River Delta Region”, once again pushing the survival dilemma of dealers to the forefront.
The letter directly points to the consequences of the current “involution” competition in the automobile market: dealers in the Yangtze River Delta region are generally facing multiple crises such as high inventory, collapse of the price system, endangered cash flow and cliff-like decline in sales. The letter specifically pointed out that some OEMs are suspected of violating the Anti-Unfair Competition Law and forcing dealers to sell cars at a loss in disguise.
In fact, this is not the first time the industry has spoken out. A week before, the All-China Federation of Industry and Commerce Automobile Dealers Chamber of Commerce had taken the lead in speaking out, and associations in Sichuan, Henan, Guangdong and other places responded one after another. Although some OEMs promised to accelerate the payment of rebates, the financial pressure on dealers has not been resolved. This collective appeal from the bottom up profoundly reveals that the long-term accumulation of production and marketing contradictions, inventory diseases, price wars and lagging rebate policies are pushing the relationship between dealers and OEMs to the brink of reconstruction.
Image source: Shanghai Automobile Sales Industry Association
The survival dilemma of dealers
As OEMs’ inventory pressure rushes to dealers, an existential crisis is spreading in the field of automobile circulation.
For a long time, OEMs have shifted their inventory pressure by pressing resellers (forcing sales tasks). In the period of rapid growth of the auto market, this model can still be maintained, but in the context of slowing market growth, the inventory coefficient of dealers continues to rise.
According to data from the Passenger Car Association, the national passenger car inventory reached 3.45 million units at the end of May 2025, and the number of days of inventory support climbed to 54 days, an increase from 51 days in May 2024.
In the letter, the association even mentioned: the inventory coefficient of luxury brands generally exceeds 1.8, and some brands even reach 2.7, most domestic brands exceed 2.0, and some brands exceed 4.0, and joint venture brands are mostly above 1.5, and some brands reach 2.0.
The “suppression” strategy that OEMs have relied on for a long time has evolved into a nightmare for dealers in the context of slowing market growth. A large number of inventory vehicles occupy a huge amount of money, and the capital occupancy rate has approached the warning line.
What’s even more serious is that since June, banks in the Yangtze River Delta region have suspended auto loan business, resulting in a large number of mortgage customers being unable to pick up their cars and serious loss of orders. The bank rebate policy plummeted, some of which fell as much as 11%, which abruptly stopped the original model of relying on “high interest and high rebate” to maintain high turnover, and the inversion of car prices became more and more common, and dealers were forced to suffer huge losses.
Inventory backlog not only brings financial pressure, but also continues to be accompanied by the risk of depreciation. It is particularly noteworthy.New energyThe inventory of car companies has climbed rapidly from 660,000 units in December 2024 to 880,000 units in May 2025, with a rapid growth momentum.
According to Gasgoo’s survey data, 60% of the dealers surveyed said that their 4S stores were in a state of slight loss, and about 10% lost more than 20%. Taking Zhongsheng Group as an example, its gross profit of new car business in 2024 will be -3.2 billion yuan, which means that it will bear a gross profit loss of about 7,000 yuan for every new car sold. “Selling cars without making money, relying on after-sales service” has become the norm of dealers’ survival.
In the rebate system built by OEMs, dealers always play the role of “capital advancers”. According to the common rules of the industry, the monthly rebate needs to be cashed out in 2-3 months, the waiting period for the quarterly rebate is extended to 3-6 months, and the annual rebate will not arrive until the second quarter of the following year.
This time difference essentially constitutes a “financial-like” operating model: dealers need to advance operating costs and use their own cash flow to support the production expansion of OEMs.
The uncertainty of the rebate policy has made dealers walk on thin ice. In 2024, a German luxury brand suddenly adjusted its assessment standards and cut the originally promised annual rebates, resulting in a collective capital chain crisis for dozens of dealers across the country. This kind of “morning and evening” business policy is not an isolated case in the industry, and when rebate income accounts for more than 60% of dealer profits, this policy risk transforms into a real existential threat.
The smoke of the price war further exacerbated the plight of dealers. Since 2023, the price war for new energy vehicles has continued to escalate, and leading brands such as Tesla and BYD have frequently reduced prices, forcing traditional fuel vehicle brands to respond passively. The OEM strategy of “exchanging price for volume” has seriously squeezed the living space of dealers.
According to a report by the China Automobile Dealers Association, the proportion of dealers losing money in 2024 will be as high as 41.7%, and the number of 4S stores will reach 4,419, marking negative growth for the first time since 2021. The price inversion phenomenon covers 84.4% of dealers, of which 60.4% is more than 15%.
The financial reports of listed dealer groups are also bleak: in 2024, except for Zhongsheng Group and Yongda Automobile, the remaining six companies will decline sharply in terms of operating income, new car revenue, gross profit and net profit, and losses in the new car business will become a common pain point. The rupture of Guangdong Yongao’s capital chain led to the closure of more than 80 4S stores, the delisting of Guanghui Automobile, the explosion of Baolide and other incidents frequently, and the industry shock continued to intensify.
Xing Haitao, secretary-general of the Automobile Dealers Chamber of Commerce of the All-China Federation of Industry and Commerce, warned: “The rapid decline in the market share of fuel vehicles will lead to a large number of dealers withdrawing from the network, and the contradictions between manufacturers will become increasingly prominent.” Xiao Zhengsan, president of the China Automobile Dealers Association, also said frankly that the life of car dealers is “particularly difficult”.
Dealers collectively “forced the palace” OEM
Since June this year, China’s automobile circulation field has set off an unprecedented channel game. Automobile dealers associations in many places across the country have issued proposals one after another, pointing out that the OEM policy has led to the serious squeeze of dealers’ living space.
On June 13, the Sichuan Automobile Dealers Association issued the “Proposal”, which revealed the common dilemma of regional dealers: mountains of inventory, vague rebate cashing deadlines, unattainable sales targets, and triple pressure almost crushing the circulation chain.
On the 20th, the Henan Provincial Chamber of Commerce of the Automotive Industry issued an initiative that on June 1, the banking system in the province suddenly stopped the “high interest and high return” car installment policy, and the suspension of car replacement subsidies on June 18 was superimposed on the suspension of the double policy sudden change like a combination punch, directly breaking through the bottom line of dealer operation.
On the 23rd, the All-China Federation of Industry and Commerce Automobile Dealers Chamber of Commerce called on automobile manufacturers to optimize the rebate policy and shorten the rebate cashing period to alleviate the financial pressure of automobile dealers and promote the healthy development of the automotive industry.
On the 24th, the Guangdong Automobile Dealers Association said that the decline in subsidies in core cities such as Dongguan and Huizhou has made the terminal market depressed, and high inventory and price inversion are eating up the last profit margins.
In fact, the conflict between dealers and OEMs has long broken through the scope of commercial negotiations and escalated into a head-to-head confrontation at the legal level. According to an investigation disclosed by the State Administration for Market Regulation in 2024, five luxury brands, including Audi, were interviewed on suspicion of using their dominant market position to commit monopolistic practices.
The regulatory authorities focused on investigating the behavior of these brands to restrict dealers’ independent pricing power through rebate policies, quota assessments and other means, and forced bundling of slow-moving models.
This regulatory storm has unveiled the tip of the iceberg for OEMs to pass on operational pressure. A luxury brand dealer complained: The OEM requires dealers to complete 90% of the car pick-up tasks every month, otherwise all rebates will be deducted; After completing the pick-up, the dealer faced an inventory backlog and had to sell at a lower purchase price, and the loss could only be made up by the OEM with subsequent rebates. This vicious circle of “pick-up-loss-rebate” is essentially to pass on the production risk of the OEM to the dealer.
Historical cases confirm the long-term nature of this contradiction. FAW Toyota dealers have jointly protested, Porsche China dealers have collectively boycotted the depot, and nine dealers of Beijing Hyundai have angrily refused to pick up the car.
In the face of the channel crisis, some OEMs have made a gesture response. Seven car companies, including BMW, SAIC-GM, and GAC Toyota, promised to pay arrears of rebates within 60 days, but industry analysts generally believe that this painkiller may alleviate the urgent need, but structural contradictions such as high inventory pressure, subsidy ebb tide, and price inversion are still unresolved.
Obviously, the smoke of this battle for the survival of dealers is still in the air……
Image source: Wingtat Automobile
The tug-of-war between OEMs and dealers
When a sales consultant repeatedly persuaded consumers to choose a loan to buy a car in the showroom, and even did not hesitate to post money to make the loan price lower than the full price, behind this absurd scene is the sharp pain of the interest pattern that China’s automobile circulation chain is experiencing. OEMs and dealers, once close “communities of interests”, are emerging with unprecedented intensity in the turbulent waves of new energy transformation.
For OEMs, the continued pressure from shareholders on sales growth is evident. Especially in the critical period of new energy transformation, traditional car companies are in a dilemma: they must not only try their best to maintain the base of fuel vehicles to support cash flow, but also must sprint to the electrification track. This strategic swing directly translates into squeezing and chaotic instructions for distribution channels.
In order to clean up the inventory of fuel vehicles, some joint venture brands are forced to assign pick-up tasks to dealers, resulting in the depth of dealers’ inventory far exceeding the warning line, and the capital chain is in jeopardy. What makes traditional dealers even more anxious is that the new power brands represented by NIO and Ideal have bypassed the traditional 4S system with their direct sales model, which not only weakens the dealer’s right to speak, but also sets a new benchmark at the end user experience level and forces channel change.
The structural defects of the traditional 4S model have been sharply amplified in the downward cycle of the industry. For a long time, new car sales have been the backbone of profit for dealers, but now this pillar is on the verge of breaking under the pressure of multiple parties.
On the one hand, thousands of square meters of high-standard exhibition halls and huge sales and service teams bring astronomical operating costs. On the other hand, the fierce involution and product homogenization between brands have made dealers almost lose their bargaining power in price negotiations, and bicycle profits continue to bottom.
At the same time, consumer habits are also migrating – online information transparency and price comparison and the rise of emerging direct sales channels are continuing to dismantle the traffic barriers and transaction control of traditional showrooms.
Under multiple pressures, dealers are undergoing a cruel transformation from a “profit center” to a “loss center”. According to a report released by the China Automobile Dealers Association, the loss ratio of automobile dealers in 2024 will reach 41.7%.
The after-sales “cash cow”, which had high hopes, also suffered the impact of the new energy wave – the high maintenance threshold of the three-electric system exceeded the technical reserves of traditional 4S stores, and a large number of car owners returned to the authorized channels of the OEM during the warranty period, resulting in after-salesOutputThe loss is serious.
The financial and insurance business once became a lifesaver for dealers to make up for losses, and its revenue accounted for 38% of total revenue in 2023. However, this growth engine is also at risk of stalling, and the iron-fisted rectification of the “high interest and high return” model by the regulatory authorities has directly hit the core power mechanism of current fuel vehicle sales.
The so-called “high interest and high return” is essentially that dealers return the high rebates of loans provided by banks to customers in the form of car price subsidies, thus creating an inversion phenomenon of “the loan price is lower than the full price”. This model has allowed dealers to sell cars at low profits or even losses while achieving overall profits through financial rebates.
However, with the intensive issuance of self-discipline conventions by the Banking and Insurance Regulatory Bureau and banking associations in Chongqing, Sichuan, Henan and other places, strictly prohibiting “high rebates to seize the market” and clearly requiring the forced promotion of high-commission financial products, the source of “high rebates” on the banking side has been quickly cut off.
In this game of interests, the lag between policies and regulations further exacerbates the imbalance. At present, our country has not yet established a “automobile dealer protection law” system similar to that of mature markets in Europe and the United States.
Although there are clear regulations in China that “suppliers shall not mandatory regulations on the number of automobiles sold, bundle unordered goods, restrict resale, etc.”, the binding force is weak in actual operation, and there is a lack of effective checks and balances on the forced pressure of OEMs, arbitrary adjustment of business policies, and even unilateral termination of cooperation. Dealers are in a systemically weak position in the game, and their reasonable demands and living space are difficult to be systematically guaranteed.
It is not difficult to see that policymakers urgently need to fill legal gaps, provide institutional guarantees for fair and healthy vendor relations, and prevent the pain of the transition period from turning into a systemic risk. When OEMs, dealers and regulators face this deep water area of interest restructuring, China’s automobile circulation system can overcome the chaos and reach a more efficient and sustainable new shore.
Can you regain the glory days?
Once upon a time, Chinese car dealers were in the golden age of “making money lying down”. In 1999, Guangqi Honda opened its first 4S store in the mainland in Baiyun District, Guangzhou, and while selling the first Accord, it also brought a standardized service process. This model quickly swept the country, from unified exterior design to rigorous pre-sale, in-sale and after-sales systems, 4S stores have become the absolute mainstream of automobile circulation.
Since then, the capital feast has begun: in 2010, Zhongsheng Group landed on the Hong Kong Stock Exchange, in 2011 Pangda Group became the first A-share listed dealer, and in 2016, Guanghui Automobile became the world’s largest dealer group through mergers and acquisitions.
However, when the wave of electrification swept in with the direct sales model, the traditional dealer system suddenly encountered a cold snap.
Tesla founder Elon Musk’s assertion that “cooperation with dealers will not end well” has become a collective action program for new power car companies.
Brands such as NIO and Ideal bypass traditional channels with urban showrooms and direct sales models, directly hitting the pain points of the dealer model: price opacity, spare parts disputes, maintenance package “traps”, compulsory binding financial solutions and other stubborn diseases, which continue to consume the trust of consumers. What’s more serious is that new energy vehicle companies regard user experience as their core asset, and the direct sales model has achieved unified prices, controllable services, and direct data connection, completely subverting the survival foundation of traditional dealers.
In the throes of transformation, the industry began to explore ways to break the situation. Traditional fuel vehicle brand dealers have a huge channel network and are actively embracing the strategy of “gasoline-electricity synergy”. Use existing venues and customer resources to introduce potential new energy brand authorization, significantly reduce the marginal cost of opening new channels, and realize the two-front battle between fuel basic disk and electric new volume.
Image source: Zhongsheng Group
For new energy brands that have already adopted direct sales, the shortcomings of after-sales service have become a bottleneck in their development. Industry insiders pointed out that these brands are actively cooperating with third-party professional service providers to build battery repair centers and launch value-added services such as “lifetime free basic maintenance” to make up for the lack of network coverage and enhance user stickiness.
Meaningfully, since 2024, brands such as AVATAR, Leapmotor, Denza, Equation Leopard, and Xpeng have chosen to “return” or partially adopt the dealer model, confirming that efficient and localized service networks are still irreplaceable.
In addition, in the face of continued pressure on the gross profit of new cars, dealer groups are accelerating their transformation from “sellers” to “comprehensive service providers of automobile life”, focusing on high-profit derivative businesses.
According to data from the China Automobile Dealers Association, the proportion of dealer after-sales segment revenue in total revenue in 2024 has increased from 60.7% to 61.6%, becoming a more stable profit pillar.
Large groups such as Guanghui and Zhongsheng have invested in the construction of large-scale centralized sheet metal spraying centers to realize the sharing of maintenance resources between brand stores, greatly reducing costs and increasing efficiency. At the same time, the consumer demand around “car life” such as car washing, high-quality addition, and personalized modification has been deeply explored, and the service boundaries have been continuously expanded.
The restructuring of the relationship between manufacturers is also critical. The industry strongly calls on OEMs to shift from “managers” to “enablers”. Core measures include the establishment of a transparent rebate system, allowing dealers to grasp the progress of rebates in real time and reduce disputes and financial pressure; Optimize inventory management and effectively reduce the burden of dealers. BMW, Mercedes-Benz and other luxury brands have taken the lead: BMW has launched targeted reduction and exemption policies to alleviate the pressure on dealers’ cash flow; Mercedes-Benz has significantly improved the phenomenon of pressure through refined supply and demand management. These initiatives aim to rebuild mutual trust and form a joint force to respond to market fluctuations.
To eradicate the chronic disease of inventory, it is necessary to change from the source of production. The China Automobile Dealers Association continues to call on OEMs to learn from the successful experience of Tesla and other companies and accelerate the transformation to the “sales and production” model. Through more accurate order management and flexible production, we can reduce blind pressure on channels, liberate dealers from the high pressure of inventory backlog and capital turnover, and truly focus resources on user service and market demand mining.
Epilogue:
The collective voice of dealers in the Yangtze River Delta reflects the deep contradictions in the field of automobile circulation. If OEMs continue to ignore channel health, they will eventually backlash. At the crossroads of alternating new energy and fuel vehicles, only by building a fair and sustainable production and marketing relationship can the long-term development of the industry be achieved.
This game has just begun.