China’s car dealerships are facing severe financial challenges as the country’s EV price war and rising production capacity pressure profits.

The shift from gasoline vehicles to EVs has disrupted traditional sales models, leading to deep discounts and losses for dealers, according to Cui Dongshu of the China Passenger Car Association.

Dealers are said to be operating with negative cash flow, with risks of insolvency increasing across the sector.

Cui called for more government support and flexible lending to help dealers manage cash flow issues.

Most of China’s top 14 dealer groups have seen revenue and profits drop over the past six years, with average net margins turning negative for the first time since at least 2019; some of these groups have added popular EV brands such as Li Auto and Xiaomi, but the benefits have yet to materialize.

Earlier this year, two BYD dealership groups closed in two provinces, leaving customers with unresolved purchases and expired insurance.

Beijing has tried to stabilize the sector, but price cuts and late payments remain widespread.

🔗 Source: Bloomberg

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