Dealers to shed inventory as sales remain stagnant

CADA says alert index highest in a decade

According to the China Automobile Dealers Association, the vehicle inventory alert index reached 81.2 percent in February, up 29.5 percent compared with January and 27.7 percent year-on-year.

The index reflects inventory pressure of automobile dealers and is composed of inventory, market demand, dealership finances and surveys of dealers' purchases, sales and stocks. It should be lower than 50 percent when the market is healthy.

This is the first time the alert index exceeded 80 percent since the association began using it in 2010.

Lang Xuehong, deputy secretary-general of CADA, said that although the index is high, dealers haven't increased inventory.

They sold very few cars last month due to the coronavirus outbreak. The most important thing now is to sell cars and maintain cash flow. If sales pick back up, dealers will consider adding inventory by mid-March, Land said.

The association forecast that February sales will decline around 80 percent year-on-year. The production lines will gradually be restored to normal in March, when sales decline is likely to recover to about 50 percent.

According to the statistics of the China Passenger Car Association, sales from Feb 1 to 23 slumped 89 percent year-on-year.

A CADA's survey showed that most dealers believed the market will return to normal by May.

CADA conducted surveys in 8,233 4S stories of 125 auto dealer groups. Some 78 percent of dealers have restored service by March 6.