Trans-China Automotive Holdings Limited: 1H2025 Financial Analysis and Investor Outlook

Trans-China Automotive Holdings Limited (“TCA”), a Singapore-listed premium auto dealership group operating in China, released its unaudited consolidated interim financial statements for the six months ended 30 June 2025. The report details a challenging operating environment, marked by intense competition, price wars, and shifting government policies. This article provides a deep-dive analysis of TCA’s financial metrics, operational trends, and strategic outlook for investors.

Key Financial Metrics & Performance Comparison

Historical Performance Trends

• Revenue Decline: The company reported a 29.6% YoY drop in revenue for 1H2025. Sales of automobiles (main business) dropped 32.9% due to price wars and lower unit sales (2,660 units vs. 3,530 units YoY), while after-sales services revenue fell 17.2% following fewer cars sold in prior periods and no repeat of last year’s product recall boost.
• Gross Loss Widened: Gross loss increased by 51.2%, reflecting deteriorating gross margins (negative 16.1% in 1H2025 vs. negative 11.3% in 1H2024).
• Net Loss Improved: Despite worsening gross margins, net loss improved by 10% to RMB66.6 million, owing to cost-cutting in selling and administrative expenses and lower finance costs.
• Cash Flows: Operating cash flow turned positive due to receipt of vendor rebates and lower pledged bank deposits, though net debt to equity ratio rose sharply to 16.5x as equity eroded from ongoing losses.
• No Dividend: No dividends have been declared or recommended for 1H2025 or prior year periods; the company is reserving cash for investments.

Chairman’s Statement

Chairman Francis Tjia’s remarks:

“As we report our financial results for the first six months ended 30 June 2025 (“1H2025”), I am tempted to repeat a lot of the same usual commentary about the state of the automotive industry in China. For the past two years, the narrative and commentary revolved around intense competition, an insane price war, steep discounting, oversupply due to massive overcapacity, a surplus of automotive start-ups and too many brands, too much local government support and financing for unviable manufacturers, and the list goes on…
The central government has recently started to fully recognize the scale and depth of the problems… The term “neijuan” (内卷) or “involution” is used in China to describe a cycle of excessive and self-defeating competition… The big change is that there are clear signs that the central government is starting to publicly mount efforts to address these issues…
Our financial results for 1H2025 have been disappointing. Compared to the same period in 2024, our revenues declined by almost 30% and our gross loss widened by more than 50% as gross margins continued to deteriorate sharply. These were offset by stable Finance & Insurance income, continued tightening and reduction in selling and administrative expenses, and a reduction in finance costs leading to a 10% improvement in net loss compared to the same period in 2024…
We believe that centralized efforts led by the government to reign in the intense competition and overcapacity will start to have a positive effect on the industry and the environment we face… It will take some time for the various guidelines and directives to filter through the entire automotive ecosystem, but we believe that special attention from the central government will likely be a catalyst for consolidation in various parts of the automotive industry…
We remain cautious on our outlook for the remainder of the year and we will continue to face significant financial challenges within a greater context of a positive change in direction of the overall industry. We hope to be in a position to benefit once real tangible changes start to take hold.”

Tone: Cautiously optimistic, recognizing continued financial difficulties but hopeful for medium-term industry recovery due to emerging government intervention.

Exceptional Expenses, Asset Revaluation, and Related-Party Transactions

• Exceptional Items: RMB3.8 million gain on early lease termination boosted other gains in 1H2025. No asset revaluation or impairment of goodwill reported.
• Related-Party Transactions: RMB709,000 in interest expense paid to controlling shareholder Octo Holdings Limited for a shareholder loan at 8% interest. Shareholder borrowings increased to provide short-term funding.
• Asset Sales: Disposal of motor vehicles generated RMB20.3 million in proceeds, improving asset efficiency.
• Debt Management: Net interest-bearing liabilities decreased slightly to RMB444.8 million, but net debt/equity ratio surged due to shrinking equity base.

Events Impacting Business

• Macroeconomic & Regulatory Changes: The Chinese government has begun intervening to curb excessive discounting, clarify rebate qualifications, and enforce prompt supplier payments. Banks have stopped paying high commissions for car financing referrals, which previously distorted pricing and increased dealer competition.
• Industry Consolidation: Several dealership groups (including BMW) have closed network stores. TCA is actively consolidating its operations, closing unprofitable showrooms and working with OEMs to reduce inventory and expenses.
• No Legal or Natural Disaster Events: No mention of legal disputes, natural disasters, or adverse court cases.

Forecasts & Strategic Developments

• Industry Outlook: The report forecasts ongoing financial challenges for the remainder of the year, but anticipates eventual improvements as government measures take hold and industry consolidation progresses.
• Cost Control: The company plans to continue cost-cutting and to withhold non-essential capital expenditures until market conditions improve.
• Corporate Actions: No share buybacks, placements, or new fundraising. A dormant subsidiary was dissolved during the period. Employee share options (4 million) were granted, vesting in 2026.

Conclusion & Investment Recommendation

Overall Assessment: TCA’s financial performance for 1H2025 remains weak, reflecting significant revenue and margin pressure, persistent losses, and heavy reliance on external funding. However, there are early signs of industry stabilization due to government intervention and consolidation. The company’s cost control efforts and positive operating cash flow are encouraging, but the erosion of equity and high net debt remain material concerns. The outlook is cautiously neutral-to-negative for the near term, with possible improvement in the medium term should industry reforms take effect.

Investor Recommendations

• If you currently hold TCA stock:
  Consider maintaining a cautious stance. Continue to monitor government policy impacts and the company’s ability to execute further cost reductions and preserve liquidity. If the industry environment and company margins do not improve in the next 6–12 months, reassessment may be warranted.
• If you do not currently hold TCA stock:
  Exercise patience before entering. Wait for clearer signs of sustainable margin recovery, improved equity levels, and tangible benefits from government interventions. The risk profile remains high given ongoing losses and industry uncertainty.

Disclaimer: This analysis is based exclusively on the company’s published financial report for 1H2025. It does not constitute investment advice. Readers should conduct their own due diligence and consult with professional advisors before making investment decisions.

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