(Yicai Global) Aug. 18 -- More than half of Chinese car dealers made a loss in the first half amid intensifying competition and slashed prices of new cars.

Only 35 percent of dealers earned a profit and almost 15 percent of the total ended the first six months of this year flat, according to a report based on survey results released by the China Automobile Dealers Association recently.

Demand for gas-powered cars was sluggish as China ended its policy of halved purchase tax in 2022. Moreover, price wars among carmakers in the first half made consumers hold on and wait for better deals, per the report. Dealers' operating costs increased and their profit margin dropped to 4.9 percent from 19.7 percent.

An executive from a Chinese car company said that the main reason for the price wars is a decline in consumers' purchasing power, especially among low-income consumers. Sales of Chinese car models worth under CNY100,000 (USD13,756) dropped in 2022, and most car dealers had to take on the automaker's inventory so their debt ratios turned out high and they are in the red, the insider added.

Profitable dealers are mainly located in fourth and fifth-tier cities with little local competition or first and second-tier cities, where they have a long track record and steady income from after-sales services, according to Lang Xuehong, deputy secretary-general of the CADA.

Imported and luxury cars turned out to be more profitable for dealers, one-third of whom were in red. Over half of dealers selling foreign brands are losing money, even higher than the 48 percent share of dealers selling Chinese brands.

Only a quarter of dealers have achieved their first-half sales targets, and the same is true for 14 percent of dealers of Chinese brands. Dealers said that automakers set goals that were too high, resulting in an imbalance between supply and demand.

Dealers were more dissatisfied with manufacturers than in the past 10 years due to issues like slow sales, market order, inventory management, and regional management. Their satisfaction score dropped to 73.1 points from last year's 74.4.

Editor: Emmi Laine