Dealers Swimming Under Unsold Cars

Share Our Knowledge With Your Friends, Contacts And Co-Workers

In early 2009 a similar situation was unfolding, consumer confidence in China was retreating as Western countries were mired in economic woes that pulled back on purse strings which ultimately slowed down Chinese exports, cars were sitting unsold on dealership forecourts but the heavy hand of government intervened with healthy tax cuts on sub 1.6L vehicles leading to China becoming the world’s biggest car market. Fast forward three years, the same situation is unraveling once more, will the government put its hand in the game once more, or do they truly believe that the Chinese car market is mature enough to make it on its own this time?

From Bloomberg:

Carmakers are giving Chinese dealers no relief in their effort to reduce a glut of unsold automobiles in a slowing economy, as factories pump passenger vehicles into showrooms faster than distributors can sell them.

Wholesale deliveries, including multipurpose and sport- utility vehicles, climbed 23 percent from a year earlier to 1.28 million units in May, the China Association of Automobile Manufacturers said June 9 in Beijing. That beat the 1.2 million average estimate of seven analysts in a Bloomberg survey, the third straight month shipments exceeded forecasts.

The surge, led by Toyota Motor Corp. (7203) and Honda Motor Co. (7267) as they recover from last year’s natural disasters, may raise pressure on distributors to deepen discounts and sell cars at a loss to meet mandatory targets set by automakers. Factory managers may have to slow production unless the discounts and potential government policies to encourage sales ease the glut.

“If there’s a bottleneck out the retail channel, obviously that at some point comes back and you have to cut production,” said Kevin Tynan, an automotive analyst at Bloomberg Industries. “Something has to give. Either you’re going to incentivize the consumer to buy, whether that’s the government or the manufacturers, or you’re going to have to pull back on production somewhere, and it doesn’t sound like the manufacturers are in a big hurry to do that.”

The carmakers and state-backed CAAM say they’re confident demand is picking up. Automakers such as General Motors Co. only disclose the number of vehicles sold to Chinese dealers — instead of consumers. Most carmakers use sales to dealerships to calculate revenue, according to Gao Song, an analyst with Citic Securities Co. (6030) in Beijing.

“There are clear signs indicating the industry is becoming more stable,” Deputy Secretary General Yao Jie said in Beijing. “For the first time this year, accumulative sales and production have exceeded that of a year earlier.”

For the first five months, passenger-vehicle sales increased 5.5 percent to 6.33 million units, according to CAAM.

Sport-utility vehicles registered the biggest wholesale delivery growth by category, rising 58 percent to 162,600 units in May as sedan sales rose 20 percent, according to CAAM. Minivans, which are used as passenger and commercial vehicles, rose 16 percent to 185,700 units, the association said.

Toyota’s China sales in May more than doubled to 78,700 units. Honda reported a 92 percent surge and Nissan Motor Co. (7201)’s sales increased 20 percent. Last year, production at the Japanese automakers was hurt by the earthquake and tsunami in Japan and floods in Thailand.

About the author  ⁄ FrankF

Frank entered the automotive industry via his father's instructions. He grew up with cars around him, especially as his father was a major auto restorer, Frank's childhood was spent passing beers, tools and coffee to his father whilst he explained the ins and outs of engines. Frank now works in the Chinese car industry at a specific manufacturer.

No Comments

Leave a Comment

See News by Industry
Industry News China Green Auto News Spy Shots China Auto Culture
See News By Brand
Acura China Acura China Aston Martin China Aston Martin Audi China,FAW-Audi Audi China
Baojun Auto Baojun Beijing Auto Beijing Auto Group Beijing Auto Beijing Auto
Besturn Auto, FAW Besturn Besturn BMW China BMW China Brilliance Auto Brilliance Auto
Buick China Buick China Baojun Auto BYD Baojun Auto Cadillac
Changa,Chang'an Chang'an - Chana Changfeng Changfeng Changhe Auto Changhe
Chery Auto Chery Chevrolet China Chevrolet Chevrolet China Chrysler
Citroen China Citroen Dodge China Dodge Dodge China Citroen DS
Dongfeng Auto Dongfeng Geely Emgrand Emgrand Geely Emgrand Englon
FAW,First Automobile Works FAW Ferrari China Ferrari Fiat China Fiat
Foday Auto Foday Ford China,Changan-Ford Ford Guangzhou Auto Guangzhou Auto
Geely Auto Geely Geely Auto Gleagle GoNow Auto GoNow
Great Wall Great Wall Hafei Auto Hafei Haima Haima
Hawtai Hawtai Honda Honda Huanghai Yellow Sea Auto Huanghai (Yellow Sea)
Hyundai China Hyundai Infiniti China Infiniti JAC China JAC
Jaguar Jaguar Jinbei Jinbei JMC JMC
Kia Kia     Jaguar Land Rover
Landwind Landwind Lexus China Lexus Lifan Auto Lifan
Lincoln Lincoln Youngman Lotus Youngman Lotus Luxgen Luxgen
Mazda Mazda Mercedes China Mercedes MG - Morris Garages MG
MINI China MINI Mitsubishi China Mitsubishi Nissan China Nissan
Opel China Opel Opel China Peugeot Reely China Reely
Renault Riich Riich Riich Roewe
Rolls-Royce China Rolls-Royce SEAT SEAT Senova Senova/ShenBao
Double Ring Double Ring - Shuang Huan Sichuan Yema Sichuan Yema Skoda Skoda
Double Ring Smart Subaru Subaru Suzuki Suzuki
Toyota Toyota Volvo Volvo Volkswagen Volkswagen
Zotye Zotye   Others    
Sign up today to receive China Car Times weekly newsletter!
Your name
Your email