Trans-China Automotive Holdings Limited: 9M2025 Business Update – Key Developments and Shareholder Implications

Executive Summary

• Revenue Downturn: Total revenue for the first nine months of 2025 declined sharply by 24.4% year-on-year, driven by a 27.5% drop in automobile sales revenue.
• Negative Margins: The company suffered negative gross margins and negative total contribution from new car sales, leading to a net loss for the period.
• Dealership Closures: TCA ceased new car sales at its Guangzhou BMW dealership in Q4 2025 to minimize losses and conserve cash.
• Brand and Cost Rationalization: Strategic initiatives underway include dealership downsizing, exit from the supercar business, and cost cutting across the organization.
• Working Capital Deficit: The company is operating with negative working capital and is reliant on continued bank and OEM support.
• Rights Issue Announced: A renounceable non-underwritten rights issue is proposed to address liquidity needs.

Detailed Business Update

1. Financial and Operational Performance

For the nine months ended 30 September 2025, Trans-China Automotive Holdings Limited (TCA) reported significant declines in key financial and operational metrics:

• Units Delivered: 4,130 vehicles, down 18.7% from 5,082 in the same period last year.
• Total Revenue: RMB 1,438.99 million, a 24.4% decrease from RMB 1,904.50 million the previous year.
• Revenue Breakdown:
  • Automobile sales: RMB 1,094.88 million (-27.5%)
  • After-sales services: RMB 337.62 million (-13.6%)
  • Agent commission: RMB 6.49 million (+124.7%, due to new Genesis model launch)

The company recorded negative gross margins and negative total contribution from new car sales, reflecting intense price competition and a challenging market for premium automotive brands.

2. Macroeconomic and Industry Environment

TCA’s dealerships are concentrated in Guangdong, a region hit harder than the national average by China’s real estate and export sector slowdown. With nationwide GDP growth slowing, and Guangdong reporting just 2.9% growth for the period, consumer sentiment is weak. A shift towards mass-market vehicles has resulted in a 13% year-on-year decline in premium car sales, hurting brands like BMW, Tesla, Mercedes, and Audi.

The dealership industry is experiencing a price war, with most dealers, including TCA, absorbing gross losses on new car sales to achieve manufacturer rebates and avoid inventory buildup. The electric vehicle (EV) segment is also volatile, with rapid changes in brand leadership and government measures to curb overcapacity.

3. Strategic Changes and Corporate Developments

• Guangzhou BMW Dealership: Ceased new car sales from 1 October 2025, now focusing solely on authorized aftersales services. This move aims to reduce net losses and working capital needs in a highly competitive market.
• Genesis Dealerships (Changsha and Guangzhou): Relocating to smaller, cost-efficient premises under the “Boutique Plus” brand, retaining OEM commitments while lowering rent and staffing costs.
• McLaren Dealerships: Shenzhen operation closed; Guangzhou McLaren dealership will be transitioned to an aftersales-only center, co-located with Genesis to further reduce costs. TCA is exiting the supercar segment to stem losses and free up working capital, citing inconsistent profitability in this segment.

The company is pursuing brand rationalization and cost-cutting on all fronts, focusing resources on aftersales services, other income, and pre-owned car sales.

4. Working Capital and Liquidity Concerns

TCA faces a negative working capital position due to accumulated losses. The company’s liquidity is highly sensitive to further industry slowdowns, economic softness, and any tightening of credit conditions from banks and OEM partners. Ongoing access to vendor rebates and credit facilities is critical; any disruption could severely impact the group’s ability to manage liquidity.

Rights Issue: To address these challenges, TCA announced a renounceable non-underwritten rights issue on 25 September 2025, with further details to be announced. This is a key development for shareholders as it may have a significant impact on share value and dilution, depending on participation and terms.

5. Forward Outlook

Management cautions that immediate recovery is unlikely without marked improvement in the economy and normalization of China’s automotive industry. The company is avoiding large capital expenditures and is focused on stabilizing operations through aftersales and pre-owned vehicle segments.

Key Issues for Shareholders and Potential Share Price Impact

• Negative Margins and Net Losses: Persistent negative margins in new car sales and overall net losses are material concerns and could pressure share prices downward.
• Dealership Closures and Brand Exits: Ceasing new car sales in Guangzhou BMW, closing McLaren dealerships, and downsizing Genesis operations are drastic but necessary steps that may impact future revenue and signal ongoing distress.
• Liquidity Risks and Rights Issue: The negative working capital position and reliance on external credit highlight significant liquidity risk. The upcoming rights issue is a major event—lack of investor support or unfavorable terms could result in further share price volatility or dilution.
• Strategic Refocusing: The company’s pivot towards aftersales and pre-owned sales, while positive for cost containment, also underscores ongoing difficulties in its core business lines.

Contact and Further Information

For further details, shareholders are advised to contact:
Michael Cheung, Executive Director and CFO
Email: [email protected]
Phone: +852 3907-6018

Disclaimer

This article is based on unaudited management accounts and forward-looking statements from Trans-China Automotive Holdings Limited as of November 2025. The information provided does not constitute investment advice and is subject to revision. Investors are advised to conduct their own due diligence and consult professional advisors before making investment decisions. The company and the author accept no liability for any losses incurred based on this information.

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