Core Insights - The automotive dealership industry is facing significant challenges, with a loss ratio of 43.5% in 2023 and a peak of 50.8% in the first half of 2024, indicating a severe downturn in profitability [3][4][5] - The rise of new energy vehicles (NEVs) and changing sales and after-sales models are disrupting traditional 4S dealerships, leading to a decline in their market share [4][8] - Many traditional fuel vehicle dealerships are closing or reducing their networks, with over 80% of closed or reduced dealerships being from fuel vehicle brands [5][6] Industry Performance - The number of 4S dealerships in China decreased by 2.7% in 2024, marking the first contraction in four years, with 4,419 dealerships exiting the market [3] - The sales of traditional fuel vehicles dropped to approximately 12.77 million units in 2024, a year-on-year decline of 11% [5] - The after-sales service revenue for 4S dealerships is also declining, with many struggling to maintain profitability in this segment [6][7] Competitive Landscape - The automotive market is experiencing intensified competition, with over 100 manufacturers and various brands across different fuel types, leading to price wars and reduced margins for dealerships [3][4] - The traditional profit model for 4S dealerships has shifted from selling cars for profit to selling at a loss, relying on high-interest financing commissions that are now being curtailed by regulatory changes [5][10] Strategic Responses - Some 4S dealerships are adapting by reducing costs, such as subleasing parts of their showrooms or relocating to less expensive areas [9][10] - A trend towards embracing NEVs is evident, with traditional dealerships seeking partnerships with NEV manufacturers to remain competitive [9][12] - Collaborations with third-party service providers, such as Tmall Auto, are being explored to enhance after-sales services and customer retention [12][14]