What’s new: An index tracking Chinese auto dealers’ inventories reached an alarming 65.3% in November, reflecting weaker demand and higher risks for dealers.
The November reading of the Vehicle Inventory Alert Index published by the China Automobile Dealers Association was 9.9 points higher than at the same time last year. The index is based on the amount of dealer funds tied up in vehicle inventories as a percentage of operating cash.
Inventory readings below 50% indicate a reasonable level of stock while higher readings signal increased risk of oversupply. The November figure was the second-highest this year behind 66.4% in April when several major cities including Shanghai were in Covid lockdowns.
A subindex tracking northern China including Beijing, Hebei and Henan was the highest across China at 71.9%.
Why it matters: Chinese auto dealers are under pressure amid repeated Covid flare-ups and persistent restrictions this year. About 41.2% of dealers were forced to close up shop for more than two weeks amid lockdowns, a survey by the association showed. About 73% of dealers said they couldn’t reach this year’s sales targets.
Regulators introduced a slew of measures since May including purchase tax cuts to stimulate auto sales after the record drop in April. But a recovery has been faltering.
Retail sales of passenger cars fell during the first 20 days of November, dropping 4% year-on-year to 859,000 units, according to the China Passenger Car Association. That compared with October’s year-on-year growth of 11%.
A sales staffer at an auto company said he expected December sales to remain low due to continued pandemic disruptions.
Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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