Impairment Charge of RMB 2.29B Drives Full-Year Loss
Zhongsheng Holdings swung to a net loss of RMB 1.673 billion for the year ended December 2025, a stark downturn from the RMB 3.212 billion profit recorded in the previous year. The reversal was caused by a 21.9-fold increase in other expenses, which included a RMB 2.29 billion impairment charge on goodwill and intangible assets. This write-down reflects the severe impact of weak domestic consumer demand and intensified competition. Concurrent with the loss, the company suspended its final dividend, which stood at HKD 0.678 per share in the prior fiscal year. The pressure was also evident in profitability metrics, with gross profit falling 17.2% to RMB 8.838 billion and the gross profit margin contracting by 0.9 percentage points to 5.4%.
China's Auto Price War Makes 56% of Dealerships Unprofitable
Zhongsheng's financial distress is not an isolated event but a symptom of a systemic crisis in China's auto retail market. According to a recent survey by the China Automobile Dealers Association (CADA), 56% of the nation's car dealerships were unprofitable in 2025. The report highlighted that a staggering 82% of retailers were forced to sell new cars below wholesale cost to stay competitive. This fierce price war directly impacted Zhongsheng, forcing it to re-evaluate its store network and asset values, leading to the substantial impairment charges. The company's revenue for the year saw a modest decline of 2.2% to RMB 164.403 billion, indicating that while it maintained sales volume, it did so at a significant cost to its bottom line.
Zhongsheng Pivots to Luxury and EVs Amid Store Closures
In response to the challenging environment, Zhongsheng is undertaking a strategic overhaul focused on network efficiency and a more profitable brand mix. The company plans to close underperforming stores and dynamically adjust its purchasing to eliminate loss-making models. Despite the sector's headwinds, Zhongsheng's new car sales grew 2.5% year-on-year to 497,000 units. This resilience was largely due to a strategic shift toward premium segments. Sales from luxury brands increased to account for 62.6% of the total, while the AITO electric vehicle brand contributed 8.2%, effectively offsetting declining sales of traditional fuel vehicles. The group will continue to focus its network on markets where it holds a leading position to enhance overall profitability.
