---
title: "Will car dealers improve in the Year of the Horse?"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/276718445.md"
description: "In the Year of the Horse, automobile dealers faced severe challenges, with the proportion of profitable dealerships falling below 30% last year. Luxury brand sales generally declined, with a gross margin of -25%. Dealers such as Audi, BMW, and Mercedes-Benz faced operational pressure, with layoffs and salary cuts becoming the norm. Although Audi's sales decline was relatively small, it still faced significant losses. Dealers hold a pessimistic outlook for the future, believing that market conditions are unlikely to improve"
datetime: "2026-02-24T10:21:17.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/276718445.md)
  - [en](https://longbridge.com/en/news/276718445.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/276718445.md)
---

> Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/276718445.md) | [繁體中文](https://longbridge.com/zh-HK/news/276718445.md)


# Will car dealers improve in the Year of the Horse?

As the sound of firecrackers for the New Year fades away, all the harsh realities mixed with the difficult post-holiday syndrome sweep in once again. Last year, the survival status of car dealers was the worst in the past eight years, with the proportion of profitable dealerships dropping below 30%.

For the new year, everyone is always eager for more beautiful expectations. But will the Year of the Horse really be better?

"Last year, we had two salary cuts, and not long ago, we also laid off a wave of employees." Before the New Year, Liu Hui (a pseudonym), the manager of an Audi dealership in Beijing, complained to the Automotive Industry and Economy Network: "I haven't had a weekend for two months."

The busyness is not due to more customers buying cars at the end of the year, but rather the opposite.

"If there were more people looking at cars and picking them up, it wouldn't be like this! Now that performance is poor, we have meetings until 3 or 4 a.m. every day, and we still have to show up for work on time the next morning."

In 2025, the terminal sales of luxury brands are expected to decline by more than 20% on average, and at the dealer level, the average gross profit margin for new cars is -25%. This means that for a car priced at 300,000, the price inversion reaches 75,000.

The recent official price reductions from BMW and Mercedes-Benz have not substantially alleviated the operational pressure on dealers. "You officially lowered the price by 10% and that stopped the decline? Discounts are already at 30%, so 10% means nothing. The manufacturers are just putting on a show," Liu Hui said.

Selling one car at a loss and losing more with each sale is a reflection of most traditional fuel vehicle brand dealers in recent years, and the latest wave of losses has hit traditional luxury brands.

According to informed sources, Mercedes-Benz's most important dealer partner in China, Li Xinghang, moved its office from a high-rent building in Wangjing to a lower-rent location to ease financial pressure.

BMW's situation is similar, with the proportion of price inversion at the terminal even lower than the average.

"BMW is so bad that I wish I could return it, that way I could lose less," Liu Hui said. His dealership group also has several BMW stores.

Comparing the sales performance of the three luxury giants, Audi's sales decline in 2025 is relatively small, with only a 5% year-on-year drop, while Mercedes-Benz and BMW's sales fell by double digits, at 19% and 12.5%, respectively. However, behind Audi's slightly better numbers lies the cost of severe losses.

"It's precisely because the sales volume was too high that we are in such a dire situation," Liu Hui sighed. "Audi has sales targets that put immense pressure on dealers; its volume maintenance is terrifying. When you push for volume, the prices inevitably can't hold up."

Liu Hui recalled that a few years ago, Audi dealers would measure their profits with a ruler. "Our group was doing relatively well; while most groups were losing money, we were still profitable. But last year, we started to incur losses, and the manufacturers couldn't make up for it; it's too scary."

NO.1

\[BBA dealers are facing a wave of store closures

"Closing late, they should slap themselves" \]

"This year, definitely more stores will close than last year. Last year, closures were forced and hesitant; this year, there's no need to think about it, just close immediately. If they close late, the bosses should slap themselves. If the manufacturers don't let me close the store, then they need to subsidize me to break even." A president of a dealership group told Automotive Industry that in 2024, he had advised his boss to close 5 stores, including Mercedes-Benz and Jaguar Land Rover. The boss was reluctant, and it wasn't until the second half of last year that they closed, losing a lot of money due to hesitation.

He also said, "Zhongsheng actually closed late."

In November 2024, media reports revealed that Zhongsheng, the largest dealership group in China, secured 50 "Huawei Smart Selection Car" authorizations, to be updated in two phases, with the first batch of brands including first-tier luxury brands like BMW, Mercedes-Benz, Audi, and Jaguar Land Rover.

However, it is understood that afterwards, the Mercedes-Benz manufacturer approached Zhongsheng Group for negotiations, maintaining the original number of stores at that time. The solution was to close or transfer some stores near the city center and move the Mercedes-Benz stores to the suburbs.

But with the continuous increase in loss-making outlets in 2025, no one wanted to bear the pressure. Both manufacturers and dealership groups chose to proactively close stores and reduce network scale.

In 2025, BMW and Mercedes-Benz each reduced over 100 operating outlets. This year is likely to continue.

In addition to closing stores and transforming into an agency model, brands have also lowered their requirements for store area to save costs, leading to the emergence of many integrated stores.

"Now everyone is out of money, and the manufacturers are out of money too. They also want light assets and are starting small-scale operations. You see, Audi used to build over 10,000 square meters, then over 8,000 square meters, and now it can be smaller. Then it can also be integrated, meaning I can carve out a piece from this store to operate other brands. In our Audi stores in Zhengzhou and Chengdu, we carved out a piece for Lincoln."

A senior executive from a dealership group that owns several luxury brands predicts that there will be even more integrated stores this year.

Compared to BBA, some second-tier luxury brand stores, due to their originally small market base, have already completed most of their store reduction tasks, appearing more "relaxed."

Zhao Jie (pseudonym), the person in charge of the Lincoln brand at Oujitong, said, "We are now a leading Lincoln dealer. As long as Ford and Lincoln are still around, we just need to focus on providing good after-sales service, and there will be no problem." Oujitong owns brands such as Lincoln, Audi, Mercedes-Benz, and Guangfeng. In 2025, Lincoln contributed the most profit to the group.

In the past year, Lincoln has promoted 34 dealers to complete lightweight transformation and achieved a "zero service absorption rate" of over 100% through optimizing after-sales structure—this means that the income from after-sales maintenance alone can sustain a store.

When talking about BBA, Zhao Jie candidly stated, "BBA is still competing for the top three positions, so their competition will definitely be more intense. Lincoln's market is also shrinking, but not as much as theirs."

He pointed out that, relatively speaking, BBA dealers face greater challenges in providing services: "Each store sells two to three hundred units a month, and even just giving each person a bottle of mineral water incurs significant costs."

A person in charge of a Jaguar Land Rover store at Huitong Luhua said, "Objectively speaking, Jaguar Land Rover is doing better than BBA. We started with differentiated high-priced products like Defender and Range Rover, but the mainstream models of BBA are '34C, 56E', which are in the price range of 200,000 to 600,000, exactly where new energy brands like Huawei, Li Auto, and Nio are making the most aggressive moves ”

NO.2

\[Transformation is a way out but also a "gamble"\]

Around 2022, both Mercedes-Benz and BMW established separate departments to promote the agency model, but later failed due to opposition from dealers. After two to three years, the price war has intensified, and dealers who can no longer bear it have now taken the transformation to new brands + agency model as a lifeline.

Among the many new energy brands, those under Huawei have become the first choice for former BBA dealers to transform, thanks to their backing from Huawei and the prior success of Aito.

According to statistics, among the top 100 dealer groups in the country, 29 have opened Aito brand stores, and 9 have opened Hongmeng Zhixing stores. The largest BBA dealer in China, Zhongsheng and Yongda, have already converted over 20% of their stores to Hongmeng Zhixing, and this number is expected to grow this year.

However, transitioning to the agency model also means losing a lot of management flexibility, which is particularly evident in the Hongmeng Zhixing system.

A luxury brand 4S store, Automotive Industry Photography

A person in charge of store construction within a dealer group complained that the requirements for building stores for luxury brands like Lincoln and Audi were already high, but they did not expect Huawei's requirements to be even more extreme.

"The investment is very high, and the requirements are extremely strict. Even the lighting, the verticality of the glass, and the gaps between the glass must be measured, which is unheard of. Moreover, it is the only manufacturer (Huawei) that sends supervisors to oversee the store construction."

She summarized: the requirements are strict, the execution is very strong, and the attitude is also very tough. But there is also a clear drawback, "There is no established system, and various requirements keep changing."

For example, the color of the storefront changed twice before opening and once after opening. It went from cocoa tea gold to coffee black gold with white, and now it has changed to wood grain white. "You know how much it costs to change this storefront, who bears this? The first two times we bore it ourselves, the last time they covered a part, which was only about 1/3."

"All the stores nationwide have to follow suit, my goodness, and the signboards, which might have been blue at the beginning, can still change after opening."

In terms of store management, Huawei's system also only speaks with data, giving stores a monthly red and black list, and those at the bottom may have their leads suspended or deliveries halted.

Another completely different point from the traditional fuel vehicle operating model is that all derivative businesses of Hongmeng Zhixing are designated, including insurance contracts, financial restaurants, advertising investments, etc. Additionally, the number of salespeople assigned to each car is also a fixed ratio. In short, dealers have almost no flexibility.

"However, as long as you scale up, you will make money. I lose tens of thousands selling an Audi, but I make money selling a Huawei. If I can sell a Zun Jie S800, I can make over a hundred thousand." However, this dealer group started two Hongmeng Zhixing stores last year but did not have the authorization for the Aito brand, so "sales have not picked up so far, and they are not making money." For many dealers looking to quickly transform, even with the opportunity to choose the Huawei system, it is still a "gamble."

A professional manager in the dealer industry told Automotive Industry that before the new Aito M7 was launched and became popular in 2024, most Aito dealers had already exited the network. However, after the new M7 was launched in the second half of 2024, the remaining dealers made a lot of money.

"If the new car can sell, the store can sustain itself; if it can't sell, it will quickly fail. Because new energy vehicles basically do not profit from after-sales, if the new cars also cannot be profitable, it will be very difficult for the store to sustain."

Two years ago, Huitong Luhua joined the Dongfeng Mengshi brand and opened two stores in Beijing, but they are already preparing to close. The reason is that sales did not pick up, and the originally agreed agency direct sales model turned into a model where the manufacturer required dealers to pay to stock cars, with business policies fluctuating. Even so, sales still could not support the profitability of the stores.

It can be predicted that by 2026, if new force brands want to continue to expand their share and encroach on the market of fuel vehicles, they will inevitably need more dealer channels, so traditional dealers still have opportunities for transformation.

However, for traditional dealers who have already suffered losses, choosing which brand and when to enter the market is also a "gamble."

NO.3

\[Final Thoughts\]

When the sales proportion of new energy vehicles exceeds 60%, it is understandable for dealers to follow the trend.

Changing brands, becoming agents, sacrificing previous freedoms and some autonomy in exchange for the advantages of light assets... these will inevitably become the choice of most dealers.

On the other hand, the elimination competition among new energy brands is still ongoing; manufacturers are gambling, and dealers must also follow suit. It's like the stock market: which stock to buy? When to buy? How to set profit-taking and stop-loss points? There will always be some making money and some losing money.

Zhao Jie told Automotive Industry: Over the years, I have seen some dealers switch to new brands, and many have switched back. Two years ago, I felt guilty for my slow transformation, but during this time, I realized that not investing was the right choice.

"Sometimes a loss can be a gain."

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