In 2025, over 30,000 automobile dealers in mainland China are bracing for a challenging year. The industry has experienced a dramatic shift from profitability to financial distress within just two years due to aggressive price wars and the rise of e-commerce platforms. According to the China Automobile Dealers Association (CADA), more than half of the dealerships failed to meet their sales targets in 2024, with many suffering significant losses or facing capital shortages. The ongoing discount battles among manufacturers have led to substantial financial losses, intensifying from previous periods. Additionally, nearly 10% of dealers have closed down due to financial strain, highlighting the severity of the situation. Industry leaders have called for an end to price competition, but discounts on various car models continue to escalate, impacting both sales volumes and profit margins.

The Impact of Aggressive Pricing Strategies on Dealerships

Dealerships across China are grappling with the consequences of intense price reductions initiated by manufacturers. These price cuts have not only affected immediate profits but also created long-term challenges for businesses. Many dealerships now find themselves in precarious financial positions, unable to achieve their sales goals. The widespread discounts on petrol-powered, electric, and hybrid vehicles have resulted in considerable financial losses, worsening the already difficult market conditions. This trend has been particularly detrimental to smaller dealerships that lack the resources to withstand prolonged periods of reduced profitability.

The financial toll is evident in the numbers: between January and November, the industry faced losses totaling 177.6 billion yuan, almost doubling from the previous year. Despite efforts by industry leaders to curb price competition, manufacturers continued to offer discounts on a growing number of models. For instance, the average price of a pure electric vehicle dropped by 10%, while hybrids saw a 4.3% reduction. Consumers benefited from these savings, but at the expense of dealer stability. The increasing number of models subject to discounts—rising from 150 in 2023 to 195 in 2024—underscores the relentless pressure on the market.

Navigating an Uncertain Market Outlook

As dealerships prepare for the coming year, uncertainty looms large. The approaching Lunar New Year holiday is expected to further dampen sales, adding to the challenges already faced by the industry. CADA advises dealers to carefully evaluate market demand and adjust their strategies accordingly. The association warns that the future of the auto market remains unpredictable, urging businesses to adopt a cautious approach. The impact of the price wars has extended beyond immediate financial losses, influencing consumer behavior and market dynamics.

The past two years have seen a surge in discount offers, with manufacturers cutting prices on a wide range of models. While this strategy initially aimed to boost sales, it has instead contributed to a cycle of diminishing returns. Nationwide sales increased by 4.7% to 20.3 million cars in the first 11 months of 2024, but this growth came at a cost. Approximately 27% of dealers achieved less than 70% of their projected sales, indicating a widening gap between expectations and reality. As the industry navigates these turbulent times, dealers must focus on sustainable business practices to weather the storm and adapt to changing market conditions.