Average stockpiles at China’s automobile dealerships fell to a four-month low in July as carmakers shut their factories for summer maintenance, according to the state-backed industry association.
Inventory levels fell to the equivalent of 1.7 months of sales in July, from 1.98 months in June, Luo Lei, deputy secretary general of the China Automobile Dealers Association said in a Sept. 1 interview in Tianjin. Average stockpiles may fall to 1.5 months of sales for the full year, Luo said.
China’s biggest auto-dealer association has said that carmakers need to scale back their sales targets or sweeten incentives because the worsening glut of vehicles across the nation’s dealerships is unsustainable. Rising stockpiles have prompted dealers to deepen discounts to meet sales targets set by automakers, according to Pang Da Automobile Trade Co.
“The industry isn’t in a healthy status,” Pang Da Chairman Pang Qinghua said in a speech at an auto forum in Tianjin. “Supply and demand is in serious imbalance.”
Manufacturing unexpectedly shrank in China for the first time in nine months as new orders contracted and output rose at a slower pace, signaling the slowdown in the world’s second-biggest economy is deepening.
China, which surpassed the U.S. as the world’s largest market for new vehicles in 2009, faces potential overcapacity, said Chen Bin, head of the industry coordination department at the National Development and Reform Commission.
The nation’s top economic planner will push forward on “structure adjustment” and encourage consolidation, Chen said at the same forum. A further expansion in auto manufacturing capacity should be linked to the development of vehicles powered by alternatives to fossil fuels, he said.