China’s Vehicle Inventory Alert Index in May down by 4.6 percentage points MoM

China's Vehicle Inventory Alert Index (VIA) stood at 54.2% in May, which dropped 4.6 percentage points over a month ago, while edged up 0.4 percentage points over a year ago, according to the China Automobile Dealers Association (CADA). However, it was still above the official warning threshold.

With respect to brands, the VIA of the imported & premium brands climbed 3.4 month on month to 52.3% in May. The mainstream joint-venture brands and the China's self-owned brands saw their May VIAs reach 53.4% and 60.7%, which fell 3.8 and 7 percentage points from the previous month.

The significant discounts offered during the May Day holiday and the governmental incentives made the footfall and sales increased for dealerships, said the CADA. Nevertheless, the market demands were also inflated for the same season, so that the sales grew slower in the second half of May despite larger discounts.

Besides, automobile dealers are undertaking heavier inventories as they are tasked with achieving higher sales goals set by automakers. To sell as many as cars, dealerships adopt such measures as strengthening sales promotion and lowering prices, which, on the other hand, led to fewer incomes for dealers as prices became topsy-turvy.

Driven by market and policy factors, China's retail sales of locally-built PVs (merely including cars, SUVs and MPVs) are projected to grow 4% year on year to roughly 1.64 million units in May, according to the China Passenger Car Association (CPCA).

The CADA said the automobile sales in June is likely to decrease over a year ago partly because the year-ago base number were elevated by the transition to China Ⅵ emission standards. Moreover, the weaker release of consumers' demands with the coronavirus pandemic ebbing in the country, the delay of the Beijing International Automotive Exhibition and the slower roll-out of new products might all contribute to the expected downturn.