Summary of Key Points
The traditional 4S (Sales, Service, Parts, and Financing) dealership model for gasoline-powered vehicles is experiencing a significant decline: declining sales, halved revenues, and a common trend of store closures. This is due to the transformation of the automotive market from gasoline to renewable energy, from franchised to direct-operated models, and from focusing on new sales to managing existing inventory. Many gasoline vehicle dealers are forced to switch to the renewable energy or used car sector, but they face challenges such as unfamiliarity with new regulations, unclear profit models, and intensified competition. The industry as a whole is in a transitional period where the old order has collapsed, and the new one has not yet taken hold.
1. Why Have Gasoline 4S Dealers Suddenly Become Less Attractive?
Traditional 4S dealers used to make money from three main sources: selling new vehicles, providing after-sales maintenance, and selling original parts. Gasoline engines are complex, requiring frequent maintenance (such as changing oil and filters), which was a stable source of profit for 4S dealers. However, this is no longer the case:
- Renewable Energy Vehicles (REVs) are Competing for the Market: With the resolution of issues related to range and charging, the cost of using REVs is lower (saving over 1,000 yuan in monthly electricity bills compared to fuel costs), and they require less maintenance. Consumers are voting with their wallets; by 2025, REVs are expected to account for more than 60% of vehicle sales (with three out of every five vehicles being REVs).
- Price Wars are Destroying Profits: Tesla led the way in price cuts, followed by other REV manufacturers, forcing gasoline vehicle dealers to offer discounts, resulting in losses on each sale (for example, a car sold for 200,000 yuan may cost the dealer more than they sold it for). Additionally, dealers are competing by offering fake trade-ins to lower prices, which has damaged their brand reputation.
- The Loss of After-Sales Advantages: The rise of third-party repair shops and chain maintenance services has made their prices half as low as those of 4S dealers, leading consumers to seek these alternatives instead.
As a result, nearly 5,000 4S dealers are expected to close by 2025, with 60% being gasoline vehicle brands. Even Chen Yu's "star dealership," which had been in business for 10 years and sold 5,000 vehicles annually, had to close because the brand releases only 1-2 new models per year, making it difficult to compete with the rapidly evolving REV market.
2. Dealers' Revenues Have Halved, and Their Work Has Become a Source of Stress
Gasoline vehicle sales used to be highly profitable: When Wang Kai started in the industry, his colleagues earned 20,000-30,000 yuan per month, enough to buy a house and a car in cash. Now, the situation is much different:
- Drastic Revenue Drops: Wang Kai's monthly income has dropped from over 10,000 yuan to 5,000-6,000 yuan after 2024, and he only made 50,000 yuan in 2025, not even enough to cover his mortgage and car loans. Many dealers fail to make any sales in a month.
- Harsh Performance Reviews: Without customers, dealers are required to stream live videos with low viewership numbers and make phone calls until 1 a.m. during car shows (even if customers are rude). Failing to meet targets results in fines.
- Loss of Bargaining Power: In the past, customers would accept the lowest price offered. Now, they bring experts to negotiate prices, often asking for prices much lower than the dealer's suggested price. To make a sale, dealers have to accept lower prices, with losses deducted from their wages (20%-50% of the sale amount). As a result, selling 10 vehicles often results in a loss of 5-6 of them.
Therefore, Wang Kai prefers to switch to the used car business, saying, "It's more stressful now, but at least I enjoy my work."
3. Dealers' Transition to Renewable Energy Vehicles: A Journey of Profit Concerns
Many dealer groups are shifting to REVs, but new problems have arisen:
- Disappearance of After-Sales Profits: REV maintenance mainly involves checking the battery and tires, which is much less costly than for gasoline vehicles. The profit source that 4S dealers relied on is no longer available. Chen Yu's group, after switching to REVs, is still unsure about how to generate stable profits after the vehicles are sold.
- Incompatibility with the New Model: Gasoline vehicles were sold with inventory pressure (manufacturers forcing dealers to buy a certain number of vehicles), while REVs are mostly sold directly or through agents with transparent prices, leaving dealers with less room for profit margins. Chen Yu's team needs to learn new skills, such as explaining technical details and brand values, rather than focusing on pricing.
- Continuing Store Closures: Many 4S dealers closing in 2025 are from joint-venture gasoline brands (such as Yang Je's former store, which closed due to the brand's withdrawal from the domestic retail market). Even those that remain are reducing their operations.
4. REV Sales: Experienced Dealers Must Relearn
Dealers transitioning to the REV market find that their previous skills are of little use:
- No Need for Bargaining: Since REV prices are set, dealers no longer need to negotiate. Instead, they must explain key features like battery range, advanced driving features, and charging speeds. Yang Je, for example, had no sales in his first half month at a new REV dealership because he was unfamiliar with the new models.
- Intense Competition: Customers compare multiple REV models at the same price point, so dealers must understand both their own products and those of competitors. Yang Je notes, "In the past, a few brief introductions were enough to sell a gasoline vehicle; now, we need to explain why our products are better."
- Younger and More Skilled Teams: REV dealers tend to be more educated and familiar with technology, requiring "old dealers" to adapt to new service processes (such as online ordering and customer follow-up).
5. The Transition of Industry Professionals
Although gasoline vehicle dealers have not left the automotive industry, the transition path is full of uncertainty:
- Switching to Used Cars: Some dealers, like Wang Kai, are entering the used car market, facing intense competition and rapidly changing market conditions (e.g., a car that sells for 80,000 yuan today may be worth only 78,000 yuan tomorrow). They are still working out how to make a profit in this new business.
- Learning to Sell REVs: Others are trying to adapt to the new requirements, such as understanding the latest product features and competing with other dealers.
- Intermediary Roles: Some dealers work as intermediaries, helping customers negotiate lower prices and earning a commission. However, this is not a sustainable long-term solution.
Chen Yu concludes, "As long as cars are in use, demand will not disappear, but whether 4S dealers will continue to meet that demand is uncertain." The industry is still in a period of trial and error, with old rules no longer effective and new ones yet to be established.
Conclusion
This transformation of the automotive industry is essentially about old models being replaced by new technologies and changing consumer demands. The decline of gasoline 4S dealers marks the beginning of a restructure. For dealers and salespeople, the only options are to adapt to the new rules for REVs or seek new opportunities in niche markets like used cars. Regardless of the path chosen, they must learn and start over. This is a painful process, but it is essential for the industry to evolve.