Domestic vehicle sales to slump, estimates CADA

China's passenger car sales are poised for a double-digit annual decline this year, though robust exports will shore up overall industry volumes, the China Automobile Dealers Association noted at the 2026 International Forum (TEDA) on Chinese Automotive Industry Development on Saturday in Tianjin.

Wang Du, vice-president of the CADA, said there are 371 million vehicles on Chinese roads and the number is expected to peak at 450 million, marking a decisive shift away from explosive incremental growth to a saturated replacement-driven market.

Unlike first-time buyers, increasingly sophisticated consumers now prioritize service quality over pure product specifications when upgrading their vehicles. Rapid growth in NEV ownership has reshaped the industry, shifting profit focus from upstream manufacturing to after-sales and life cycle services and unlocking new value potential for the auto aftermarket.

The traditional auto retail business model is rapidly becoming obsolete. Where dealers once relied on one-off vehicle sales, modern consumers demand continuous offline support throughout the entire vehicle life cycle, turning long-term service operation into the core value of modern automobile distribution.

Domestic dealership profitability has deteriorated sharply across the sector. New car gross margins have fallen to an average of -21.4 percent, making vehicle sales a customer acquisition channel with no standalone profit contribution, according to Wang.

Core revenue pillars including after-sales maintenance, auto finance and insurance have continued to shrink, pressured by lower maintenance pricing and longer service intervals that have eroded dealers' traditional profit base.

Data from the CADA shows that the average inventory cycle stands at 1.58 months, with mainstream brands holding stock levels above two months. Dealer satisfaction with automakers dropped to a multi-year low of 56.3 percent.

Market sentiment remains bearish, with only 11.2 percent of dealers projecting full-year revenue growth, while more than 70 percent expect business performance to decline.

Wang said vehicle distribution had been a passive downstream segment for years, with automakers controlling product planning, pricing and profit distribution. But in the new saturated market era, dealerships will gain genuine industry bargaining power based on their service and market value contributions.