Core Viewpoint - Despite predictions of a strong start in January 2026, the operational conditions for automotive dealers may still face challenges due to high inventory levels and reduced consumer demand [3][4]. Group 1: Market Conditions - The inventory warning index for Chinese automotive dealers was reported at 57.7% in December 2025, an increase of 7.5 percentage points year-on-year and 2.1 percentage points month-on-month, indicating a decline in industry prosperity [3]. - A survey by the China Automobile Dealers Association revealed a decrease in customer traffic and a cautious market outlook, leading to reduced demand and narrowing profit margins on new car sales [3][4]. - Nearly half of the dealers achieved a task completion rate of 90% or above for the entire year of 2025, with 15.3% exceeding their targets [3]. Group 2: Sales Forecast - The automotive consumption index for December 2025 was 97.7, higher than the previous month, suggesting an anticipated "opening red" for the automotive market in January 2026 due to pent-up demand from the end of year and pre-Spring Festival purchases [4][5]. - The retail volume of passenger cars in December 2025 was approximately 2.2 million units, with an annual forecast of 23.55 million units for 2025, remaining stable compared to 2024 [5]. Group 3: Challenges Ahead - The introduction of the new "old-for-new" vehicle replacement subsidy policy in December 2025 is expected to positively influence consumer sentiment and stimulate demand at the beginning of 2026 [5]. - Dealers are projected to continue facing significant pressure in 2026 due to tightening consumer spending, policy shifts, and ongoing price competition, which may lead to a vicious cycle of high inventory and financial strain [5]. - The competition in the new energy vehicle market is intensifying, while the traditional fuel vehicle market is shrinking, adding to the competitive pressure and uncertainty for dealers [5].