Car dealers keeping an eye on stock to help balance the books

Trade association says depressed market has not shown an upturn for 15 months in a row

Car inventories remained high in March, forcing auto dealers to control their stock with more caution, said the China Automobile Dealers Association. The index reached 55.3 percent, hovering above the alert level for 15 months in a row.

The Vehicle Inventory Alert Index, which the association started to use in 2010, should be lower than 50 percent when the market is healthy.

The index is composed of inventory, market demand, dealerships' finances and compiled surveys of dealers' purchases, sales and stock.

Last Monday, CADA released statistics that showed the index has been higher than 50 percent since last January. It means the depressed market has not shown an upward turn.

By February, auto sales had fallen for eight months in a row since last July. Last year marked the first fall since 1990 in the country.

In March, the index decreased to 55.3 percent from February's 63.6 percent. It seemed to show a sign of warming.

Lang Xuehong, deputy secretary-general of CADA, said that the result is led by complex factors. These include February car purchases being limited by the weeklong Spring Festival holiday and some regional auto shows held in March stimulating market demand.

To reach their season purchase goals set with car manufacturers, dealers had to increase purchases at the end of March, the last month of the first season, Lang added.

The negative factors include that customers adopted a wait-and-see attitude over policy changes, such as China's reduction of value-added tax by 3 percentage points to 13 percent in the manufacturing sector from April 1. Some regions applied stricter emissions standards of State VI.

The association forecast that the market demand in April will be less than March.

"Affected by traditional customs, consumers in some southern regions will avoid buying products before and after Tomb Sweeping Day - April 5. It will affect this month's sales to some extent," Lang said.

According to a report released by CADA late last month, a total of 39.3 percent of dealers reported losses and 33.1 percent made profits.

Under long-term pressure, dealers said they will set different inventory alert lines for different car brands. Once the line is reached, the dealers will suspend purchases, according to CADA.

Lang said that the stock level this year will be lower than 2018 because dealers will control inventories to survive.

In terms of different vehicle groups, the statistics from CADA showed that the dealers of Chinese-branded vehicles faced the greatest pressure. Their index reached 66.2 percent last month. The index of joint ventures is close to the overall level of 56.3 percent.

With sales of most premium vehicle brands seeing growth, the index of luxury brands last month showed the best condition. It reached 50.6 percent, close to the warning line.

German carmaker BMW sold 107,700 units in China in the first two months this year, with a year-on-year increase of 8.8 percent.

Audi's sales reached 104,100 units in the same period in China, accounting for almost 40 percent of its global sales. The number is a record in its history.