Automotive Dealerships (4S Centres)

Automotive dealerships (4S centres) refer to franchised automotive businesses authorised by vehicle manufacturers that integrate four core functions: Sales (vehicle sales), Spare parts (parts supply), Service (aftersales maintenance and repairs), and Survey (customer feedback). Serving as the primary channel of the franchised automotive distribution model, 4S centres built robust network barriers during the internal combustion engine (ICE) era; however, under the dual pressures of new energy vehicles (NEVs) and direct-to-consumer (DTC) sales models, they are currently weathering growing pains as they shift from "effortless profits" to "deep transformation."

Operating Model and Core Characteristics

4S centres operate under a "four-in-one" franchise model, where facilities are funded and built by dealers in accordance with carmakers' corporate identity (CI) standards, featuring uniform interior and exterior architecture, and are restricted to retailing a single authorised brand. Their core commercial viability is anchored in a high-volume, low-margin model on new vehicle sales, while driving substantial profit margins through financing and aftersales—new car retailing drives the top-line revenue, but bottom-line profits rely heavily on ancillary offerings such as aftersales servicing, hire purchase (HP) loan commissions, and motor insurance agency fees.

Industry data shows that among the top 100 dealership groups in 2025, new vehicle sales still accounted for 74.9% of total revenue; however, aftersales operations generated 64.6% of overall gross profit from just a 9.5% revenue share. With an average gross margin reaching 44%, aftersales has proven to be the genuine "profit anchor" for dealer networks.

Current Industry Landscape and Challenges

The automotive dealership sector is currently under unprecedented existential pressure. In 2025, Zhongsheng Group, the market's largest dealership group, posted its first net loss since listing on the stock exchange, racking up a deficit of around RM1,900,000,000. The primary contributor was a loss exceeding RM3,700,000,000 in new vehicle sales, driven mainly by price inversions where retail prices fell below wholesale invoice costs and manufacturer rebates failed to offset the gap.

Such losses are widespread across the sector. A report by the China Automobile Dealers Association revealed that 55.7% of dealerships were operating in the red, with the proportion of loss-making outlets projected to widen further and profit margins to contract in the first half of 2026. In 2024 alone, 4,419 4S centres exited their respective networks, reducing the total footprint of traditional ICE 4S centres from a peak of 35,000 down to approximately 32,000 outlets.

The root causes stem from three converging structural shifts. Collapse of traditional profit dynamics—Direct sales and agency models have rendered showroom prices completely transparent, stripping dealers of their retail pricing power and invalidating the conventional wholesale-to-retail margin model, while tighter financing compliance has drastically shrunk hidden commission streams. Restructuring of retail channels—With NEV market penetration crossing 60%, consumer purchasing behaviour has migrated from conventional 4S centres to shopping mall showrooms and digital platforms, where the unbundling of "delivery, sales, and service" has thoroughly disrupted traditional dealer formats. Imbalance in OEM-dealer dynamics—Under the traditional franchise model, dealers have long served as inventory buffers for carmakers; pressured to liquidate stock to maintain cash flow, dealers have resorted to deep price cuts, sparking destructive price wars across dealer networks.

Transformation Pathways and Market Trends

Dealerships are aggressively pivoting from being primarily "car sellers" to "service providers," forging a new three-pronged ecosystem covering new energy vehicles, pre-owned vehicles, and smart connected services.

On the asset-light channel front, sprawling, full-scale 4S centres are giving way to compact, boutique retail touchpoints. Lincoln, for instance, reduced its single-outlet footprint by 80% to 800 square metres, slashing initial capital expenditure from the RM10,000,000 mark down to RM1,500,000. Meanwhile, FAW-Volkswagen cut facility setup timelines to just 36 days by adopting a "shared workshop, split showroom" model.

In terms of business portfolio realignment, the NEV sales penetration rate among the top 100 dealership groups surpassed 30% for the first time in 2025, reaching 33.6%, with NEV unit sales jumping 35.4% year-on-year to 2,030,000 units. Gross profit contribution from pre-owned vehicles increased to 4.7%, with profitable dealer groups recording an average used car gross margin of 6.7%.

Direct-to-consumer models are also gaining momentum. At present, the automotive retail sector remains anchored by the authorised franchise model at roughly 50% market share, followed by the agency model at around one-third, while capital-heavy direct sales account for under 20%. These three operating models are expected to coexist side-by-side for the foreseeable future.