Core Insights - The automotive market in China is experiencing growth in retail sales, particularly in the new energy vehicle (NEV) segment, but the overall profitability is declining, leading to significant challenges for automotive dealers [1][2][3] - The automotive circulation industry is facing a dual reality, with strong retail performance contrasted by severe operational difficulties for dealers, including increased losses and inventory pressures [2][3][4] Group 1: Market Performance - From January to October 2025, domestic passenger car retail sales reached 19.395 million units, a year-on-year increase of 9% [2] - New energy vehicle retail sales reached 10.27 million units, with a year-on-year growth of 23%, resulting in a cumulative retail penetration rate of 53% [2] Group 2: Dealer Challenges - In 2024, the number of 4S dealerships in China decreased by 4,419, with a net reduction of 625 in the first half of 2025, indicating a continued contraction in the industry [3] - The proportion of dealers reporting losses rose to 52.6% in the first half of 2025, up from 41.7% in 2024, highlighting the worsening financial situation [3] - 74.4% of dealers experienced price inversion, with 43.6% facing price inversions exceeding 15% [3] Group 3: Industry Dynamics - The automotive circulation industry is undergoing a revolutionary transformation, moving from traditional 4S dealership models to a more diversified system including authorized, direct, and mixed models [3][4] - The industry is grappling with high inventory levels, with a comprehensive inventory coefficient of 1.35 in September 2025, indicating increased operational costs and cash flow pressures for dealers [3] Group 4: Recommendations and Future Outlook - The China Automobile Circulation Association is advocating for standardized exit clauses in dealer contracts and has proposed measures to address issues like price inversion and excessive inventory [5][7] - The second-hand car market is projected to grow significantly, with transaction volumes and values expected to surpass 20 million units and 1 trillion yuan, respectively, driven by policy support and market demand [7][8] - The "Brand Grading Index" has been introduced to assist dealers in making informed investment decisions amidst the complex market landscape [12][14]