10,000 4S Shops May Close or Restructure, Large Stock of Original Parts Sold at 10-30% of Original Price, 70% of Auto Parts Dealers May Be Eliminated in the Future

"A collapse of a 4S dealership could potentially sustain 10 independent repair shops." This was once seen as a benefit for the independent aftermarket, but now it has become a "gray rhino" for auto parts suppliers.

When a 4S dealership closes down, it means a batch of original parts are flooding the market at "bargain prices." These original parts are often sold at 20-30% of their original price, or even 10%, severely impacting the existing pricing system and eroding the survival space of auto parts dealers.

Reality is even harsher than imagined. Incomplete statistics from AC Auto show that since 2020, 29 car manufacturers have gone bankrupt or ceased operations; in the past five years, more than 8,000 4S dealerships have closed or been repurposed. The wave of new energy vehicles is accelerating, and the pace of closures continues to increase.

The chain reaction triggered by the collapse of automobile companies began with French and Korean brands, spread to American ones, and this year, even the traditionally stable Japanese fuel vehicles were not spared.

Under fluctuations, large suppliers that used to specialize in original parts are also starting to "struggle to consume and dare not consume too much" — the prices of original parts fluctuate drastically, and the risk of purchasing is increasing day by day.

Auto parts suppliers are thus referred to as "the toughest group in the aftermarket," especially those dealers heavily invested in a single brand or with high inventory of specific car model parts, finding themselves in a dilemma.

Many Japanese and Korean parts merchants either quietly exit the market or merge together; meanwhile, the "scalpers" who profit from "information gaps" are the first to be eliminated in this round of market reshuffling.

01. The massive withdrawal of 4S dealerships triggers a wave of original parts sales.

According to AC Auto columnist "========," once a 4S dealership goes bankrupt, the original spare parts it has in stock are often not accepted by other authorized dealers and are mostly bought in bulk by large parts suppliers at extremely low prices.

"Three years ago, I dealt with a store that sold parts at a 10% of their original price—this is an extreme case; currently, the industry generally has a recovery price of around 30%, and being able to recover half the cost is considered a relatively high level," he added. "If it's an old store that has been operating for more than three years, the proportion of old stock in the inventory is higher, and the valuation is even lower."

In his view, car manufacturers usually do not repurchase sold parts or vehicles. Therefore, the closure of each 4S dealership means that the pricing system for auto parts in the region will be impacted. Especially in cases of sudden closures, parts suppliers are eager to sell off their stock; otherwise, they will have to bear additional storage and management costs.

Under normal circumstances, the annual inventory turnover rate of a 4S dealership should reach at least 6 times, with different brands having different requirements. Taking an example of a dealership with an annual after-sales parts turnover of 3 million yuan, a reasonable inventory should be controlled within 500,000 yuan, and it must undergo dynamic assessments by the manufacturer.

As a result, when multiple 4S dealerships in a region collectively withdraw from the network, the impact on the auto parts market becomes increasingly significant. Currently, the original parts being sold off have not yet entered the independent aftermarket channels on a large scale, so the impact on the repair side has not fully manifested—because the buyers usually have their own distribution networks. However, as the wave of 4S dealership closures spreads across the country, the traditional distribution chains in certain areas may likely "fail" at any time.

According to estimates from Hancha in the automotive industry, the current wave of 4S store closures may continue until 2028, with potentially only half of the stores surviving. Considering there are currently more than 30,000 4S stores nationwide, over 10,000 are expected to face closure, merger, or transformation in the coming years. It is foreseeable that more original manufacturer parts will flood into the independent aftermarket at unprecedented low prices, further expanding the impact and scope.

For aftermarket operators, the price of original parts has always been the "anchor point" for market pricing. Once its price collapses, it may lead to a collective "plunge" in the entire parts value chain.

An industry insider helplessly gave an example: "You stocked 3 million worth of parts for a certain model, and suddenly the market tells you they're only worth 300,000—what should you do then?"

02. "Surviving in the Cracks": Auto Parts People Becoming More "Humble"

The auto repair industry is under overall pressure, with a continuous contraction in demand for parts. Yet, auto repair shops are raising their demands on parts suppliers: they want lower prices, quality, after-sales warranty, door-to-door delivery, and even stock, equipment delivery, and monthly settlement.

Even so, auto parts suppliers may still face complaints from repair shops.

Recently, the owner of a car repair shop revealed on Douyin that he spent over six thousand to buy a "Porsche original gear sensor," only to find out it was a refurbished part from a dismantled car. Fortunately, he didn't install it; otherwise, he wouldn't be able to return it. Most comments sided with the repair shop, believing the auto parts dealer was unethical, saying, "Dismantled parts and original parts are not the same price!"

However, auto parts dealers also complain: some repair technicians make diagnostic errors and buy the wrong computer boards or sensors, which cannot be installed and yet they want to return them; there are also those who, due to their own installation mistakes, falsely accuse the parts of quality issues, and if returns are not accepted, they threaten to expose the issue on TikTok.

Accessory suppliers are caught in a dilemma: returning products means a loss, but not returning them means losing customers. How should the returned items be handled? Refurbish and resell them, or destroy them?

What makes it even harder for them to catch their breath is the "arms race" among peers.

Some auto parts alliances have launched "ultimate services": free delivery, extended payment terms, equipment provision, and even subsidies, continuously raising the expectation threshold of repair shops.

Behind these extreme services are higher operational costs. Whether it's offering extended warranties for parts, free shipping and returns, or longer payment terms to repair shops, auto parts suppliers have to squeeze their profit margins even further. This tests the auto parts companies' financial chains and risk management capabilities.

For an individual auto parts dealer, they either have to join the "exhaust yourself, outcompete your peers" alliance, using low prices and excessive services to retain customers, or watch helplessly as customers are lured away by "sugar-coated bullets"—and once customers get used to this kind of "pampering," it's hard to win them back.

Overall, the industry is in decline, and various pressures converge on the auto parts sector. They must cope with low-price dumping from upstream suppliers and "cutthroat competition" from peers, while also meeting the downstream's almost "unlimited liability" service expectations. Struggling to survive in a tight spot, their "humility" becomes increasingly apparent.

03. Will 70% of auto parts distributors be eliminated in the future?

The automotive parts industry is experiencing an unprecedented difficult period, driven by systemic impacts from a combination of multiple historical factors.

Firstly, the Chinese automobile market has shifted from incremental competition to stock competition, thoroughly breaking the traditional supply-demand relationship. Meanwhile, the rapid rise of new energy vehicles has triggered a drastic restructuring of the industry chain, and many companies, unable to react in time, are already facing the risk of being eliminated.

The combination of these two transformations has accelerated the reshuffling of joint venture brands and some independent car manufacturers. Many car companies have been forced to exit the Chinese market, and those that remain face the dilemma of declining sales and shrinking distribution networks.

According to statistics from "Automotive Parts Think Tank," more than 13,000 auto parts suppliers are facing a transformation crisis. The sharp decline in sales of French and Korean brands has led to the shrinking business of thousands of their suppliers. Some American and Japanese models are gradually exiting the market, similarly affecting numerous upstream and downstream enterprises. The decline of some domestic independent brands also forces related suppliers to seek new paths.

On the other hand, OEMs and the 4S dealership system are tightening the flow of after-sales customers to the independent aftermarket through a series of customer retention strategies such as "insurance + accident vehicle repair" and lifetime warranties, resulting in a continuous reduction in the customer base that external auto parts suppliers can serve.

At the same time, the ebb of capital and weak consumption have prolonged the bargaining cycle between automotive parts platforms and distributors, causing market consolidation to reach a stalemate.

These factors are interwoven and accelerate in cycles, like a flywheel spinning faster and faster, continuously amplifying systemic risks. Some predictions suggest that up to 70% of traditional auto parts dealers may be forced out of the market in the future.

Currently, dealers with inventory and purchasing advantages can barely sustain themselves. However, as model iterations accelerate and e-commerce prices become increasingly transparent, the sales efficiency of dealers is declining, and unsold parts are accumulating in warehouses. These not only tie up precious cash flow but may also become obsolete due to model phase-outs. Once trapped in a vicious cycle of "unable to sell, afraid to purchase," the pressure on the cash flow chain will soar dramatically.

When the entire industry's value chain continues to suffer, no participant can remain unscathed. Previously, a batch of fuel vehicle 4S dealerships closed en masse due to inventory backlog and financial issues, seemingly the first "pioneers" to fall. Next, will more auto parts distributors become the next dominoes to topple?