Is sales recovery nearing an end?
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August 13, 2020 01:47 PM

Is sales recovery nearing an end?

Yang Jian
Managing Editor of Automotive News China, based in Shanghai, and Reporter covering China for Automotive News
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    Jaguar's booth at the Chengdu auto show in July

    SHANGHAI – After the coronavirus outbreak was brought under control in March, new-vehicle sales swung back – increasing 4.4 percent in April after a 42 percent slump in first quarter. 

    By July, the market had racked up four straight monthly gains. 

    Now, there are signs that the rebound may be about to end.
     
    In the first 10 days of August, vehicle sales at all foreign automakers producing in China and 11 major domestic auto manufacturers, which account for nearly all output in China, slumped 18 percent to some 384,000, the China Association of Automobile Manufacturers said Thursday. 

    During the period, light-vehicle sales at the top producers fell 18 percent to roughly 357,000 while commercial-vehicle deliveries declined 11 percent to about 26,000. 

    Could sales rally in the final weeks of the month?

    In theory, they could. But rising inventory levels at dealerships signal some consumers may be taking a break. 

    Behind pent-up demand after many showrooms were shuttered in the first quarter, new-vehicle sales rebounded sharply, jumping 16 percent to top 2.1 million in July, after growing 11 percent in June and 15 percent in May, according to CAAM’s tally.

    Data from the China Automobile Dealers Association show dealership stockpiles rose to an average 57-day supply last month from 52 days in June and 47 days in May.  

    Over the past three months, an increasing share of the vehicles shipped from automakers have ended up parked at dealerships instead of in the hands of vehicle buyers. 

    CAAM, acknowledging the problem, joined CADA this week in urging automakers to stop padding inventories at dealerships. 

    The two trade groups are not as optimistic about the market outlook given the dampening effect on vehicle demand from a lingering virus outbreak in China. 

    In the past few months, sporadic, small-scale hot spots have continued to pop up in Chinese cities, including Beijing – the national capital – and Urumqi, capital of the northwest region of Xinjiang. 

    With the market overshadowed by the pandemic, CAAM this week kept unchanged an earlier forecast: Overall new-vehicle sales in China will drop 10 to 20 percent in 2021 despite the recent rebound. 

    Only 29 percent of dealerships expect sales to grow this year, while 43 percent of them fear the market will shrink more than 15 percent, a CADA survey released this week found. 

    Judging by the sharp decline in new-vehicle sales in the first 10 days of August, reality has again set in for an industry that has enjoyed a few months of relief.

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