(Yicai) Aug. 20 -- Competition in China’s auto market has become so cutthroat that deep price cuts are eating into dealers’ profits, with more than half of them operating at a loss in the first six months, according to a recent survey.

Some 52.6 percent of auto dealers lost money in the six months ended June 30, a big jump from 41.7 percent at the end of 2024, according to a report released by the China Automobile Dealers Association yesterday. And only 29.9 percent of dealers managed to make money over the period, down from 39.3 percent at the end of last year.

Distributors of new energy vehicles fared better than those of traditional fossil fuel-powered cars, the report said. Among dealers of independent NEV firms, 42.9 percent turned a profit, 22.7 percent broke even and 34.4 percent reported losses. By contrast, only 25.6 percent of traditional gasoline-powered car dealers made money, 15.8 percent broke even, while 58.6 percent lost money.

This gap has already prompted some fossil fuel-vehicle 4S dealers, which offer services including sales, services, spare parts and surveys, and even those selling luxury brands, to switch focus to electric cars. One such dealer told Yicai that although commissions on self-owned NEV brands are not as high as those on luxury fossil-fuel powered cars, the higher sales volumes make up for it. At the same time, commissions from luxury automakers have also shrunk, he added.

Only 30.3 percent of dealers hit their sales targets in the first half, according to the survey. Around 29 percent were unable to meet 70 percent of their sales goal, while 40.7 percent accomplished over 70 percent but were not able to meet the full target.

Selling new cars at a loss is now one of the biggest headaches faced by auto dealers. Carmakers and dealers are locked in price-cutting wars, meaning higher sales do not always translate into higher revenue, and revenue growth does not necessarily bring profits. In fact, 74.4 percent of dealers faced some degree of “price inversion,” where cars are sold below cost, and 43.6 percent reported sales at more than 15 percent below cost.

Bonuses that dealers used to receive from manufacturers for hitting basic sales targets have dwindled, dragging down dealer satisfaction with automakers. Only a handful of carmakers are still paying out full bonuses, according to the survey.

Editor: Kim Taylor