Trans-China Automotive Holdings Limited: FY2025 Financial Results Analysis

Trans-China Automotive Holdings Limited (“TCA”) has released its unaudited condensed consolidated interim financial statements for the full year ended 31 December 2025. The Group, which operates premium automobile dealerships in China, faced a challenging operating environment marked by intense competition, price wars, and industry disruption from new energy vehicles (NEVs). Below, we analyze key financial metrics, historical trends, and material events, and provide an outlook and investment recommendations based solely on the information disclosed in the report.

Key Financial Metrics and Performance Table

*Value inferred for illustration; actual 1H NAV not explicitly stated.

Historical Performance Trends

• Revenue: Decreased 21.9% YoY to RMB1,995.0 million in FY2025, mainly due to lower automobile sales volume and price pressure.
• Net Loss: Widened to RMB134.7 million in FY2025 from RMB103.4 million in FY2024, primarily due to weaker car margins, impairment losses, and lower other income.
• Gross Margin: Gross loss on automobile sales remained negative, though improved slightly in the second half as sales volume reduced and additional OEM support was received.
• After-sales Services: Revenue fell 10.2% YoY, with gross margins declining slightly due to lower volume and less profitable service mix.
• Agency Revenue: Increased 65% YoY, reflecting a shift in dealership arrangements and some new model launches.
• Other Income: Down 34.6% YoY as banks ceased offering high referral commissions mid-2025.
• Operating Expenses: Cost containment efforts yielded a 13–15% reduction in selling and administrative expenses.
• Impairments: RMB29.9 million in impairment and non-operating losses, mainly from the closure of underperforming business units and relocation of stores.

Exceptional Items and Non-Recurring Events

• Impairment Losses: RMB25.2 million impairment recognized on closure/relocation of loss-making units, reflecting management’s active pruning of underperforming businesses.
• Asset Disposals: RMB4.7 million net loss recorded on the disposal of assets that could not be relocated.
• No Dividends: No dividend proposed or paid for FY2025 or FY2024, citing the need to preserve cash and address working capital deficits.

Corporate Actions and Fundraising

• Rights Issue: In September 2025, the company proposed a renounceable non-underwritten rights issue of up to 294.8 million new shares (1-for-2) at S\$0.02 per share to strengthen the capital base.
• Share Options: 4 million share options granted in May 2025 under the Employee Share Option Scheme, vesting annually over 5 years, exercisable from May 2026 to May 2030.
• No Share Buybacks or Dilution (other than above): No buybacks, cancellations, or treasury share movements.
• Related Party Transactions: RMB1.0 million interest expense incurred on loans from controlling shareholder Octo Holdings Limited, at 8% interest, due on demand. No other significant related party transactions disclosed.
• Divestment: A dormant subsidiary in Changsha was dissolved in May 2025. No other acquisitions or disposals.

Macroeconomic and Regulatory Environment

• Chinese auto retail sector faced severe pressure from NEV-led disruption, weak consumer sentiment, and aggressive discounting practices by new entrants.
• Industry-wide car margins fell to a record low, with December 2025 at 1.8% and FY2025 at 4.1%—a five-year low.
• Government intervention in 2H 2025 included: banning high referral rebates from banks, requiring faster OEM payments to suppliers, mandating simplified rebate structures, and prohibiting auto sales below cost.
• Phasing out of EV purchase tax rebates began, impacting demand dynamics for both EV and traditional vehicles.
• Dealership closures in some cities have led to reduced competition and potential consolidation in aftersales services, benefiting survivors like TCA over the medium term.

Chairman’s Statement

“The Chinese automotive market has undergone a period of acute disruption… over the past few years, many newly established domestic EV players have attempted to scale volume to build brand awareness and achieve economies of scale, often relying on aggressive pricing strategies, including selling below cost. While these tactics have supported strong volume growth, the practice have significantly compressed industry profitability…

Early indicators suggest [regulatory] measures are beginning to rebalance market dynamics… In several of TCA’s cities, multiple dealerships of the same brand and other premium competitors such as Mercedes-Benz have exited the market reducing direct competition… Taken together, these regulatory and market developments are gradually shifting the industry toward a more sustainable operating environment for both OEMs and dealers. In the near term, however, conditions are expected to remain soft, as the full impact of the regulatory changes and new measures will require a transition period before industry normalization is fully realized. During this adjustment phase, TCA intends to continue pruning underperforming locations and to remain conservative on capital deployment, prioritizing sites and brands with clear sustainable business models.”

Tone: The Chairman’s statement is cautiously optimistic for the medium term, but acknowledges ongoing near-term challenges and the need for continued prudence and restructuring.

Remuneration and Related Party Transactions

• No specific directors’ remuneration figures were disclosed in the report.
• RMB1.0 million was paid to Octo Holdings Limited (controlling shareholder) as interest on loans; no other related party transactions of significance.

Events and Risks Impacting the Business

• No mention of legal disputes, major tax changes, or natural disasters affecting operations.
• Regulatory changes and market consolidation are expected to improve industry profitability over time, but the transition will be gradual.
• No new material events post-31 December 2025.

Conclusion and Outlook

Overall Assessment: The Group’s performance in FY2025 was weak, reflecting the challenging macroeconomic, regulatory, and competitive environment in China’s automotive sector. Losses widened, cash flow remains tight, and the balance sheet shows negative equity. The company is taking corrective action by pruning loss-making operations, conserving cash, and strengthening its capital base through a rights issue. Regulatory reforms and industry consolidation provide some hope for a return to sustainable profitability in the medium term, but the near-term outlook remains difficult.

Investor Recommendations

• If you are currently holding TCA shares: Consider reducing exposure or holding only if you have a high risk tolerance and a long-term investment horizon, as recovery will require both successful internal restructuring and a normalization of industry conditions. Monitor the rights issue and capital position closely.
• If you are not holding TCA shares: Avoid new purchases at this time unless you are a speculative investor seeking exposure to a potential turnaround story. Wait for clear signs of margin recovery and sustainable profitability before taking a position.

Disclaimer: This analysis is based solely on information contained in the FY2025 financial report and does not constitute investment advice. Please consider your own financial situation and consult a licensed financial advisor before making investment decisions.

View TC Auto Historical chart here