Automobile sales and production volumes growth figures continue to decline in May, analysts maintain poor expectations for June

As summer comes into full force, the Chinese automobile production and sales volumes continue to decline. According to the most recent monthly new car production and sales volume report from the China Association of Automobile Manufacturers, bother passenger and commercial vehicle production and sales figures fell from April to May.

According to statistics, a total of 1.98 million automobiles were manufactured in China in May, while 1.91 million automobiles were sold. The figures are 4.44 percent and 4.64 percent less than the respective figures from April. May production and sales figures for passenger automobiles totaled 1.65 million units and 1.59 million units, down 1.07 percent and 18.47 percent from April. Those for commercial vehicles totaled 326,200 units and 320,800 units, respectively, down 18.47 percent and 18.02 percent from April. 9.92 million automobiles were produced and 9.84 automobiles sold in the country from January to May, respectively representing positive year-on-year growth of 9.37 percent and 8.9 percent.

The own brand automobile market has been especially lackluster in May, with both sales growth and market share slipping. A total of 580,600 own brand automobiles were sold during the month, down 2.72 percent from April, but up 5.41 percent from the previous May. Own brands made up 36.51 percent of all passenger automobiles sold in the country over the month, down .58 percent from April and down 2.92 percent from May of last year. Own brand passenger automobile sales from January to May totaled 3.06 million units, growing only .94 percent from a year ago. They made up 37.97 percent of all passenger automobile sales made over the five month period, down 3.83 percent from the figure recorded for the same period a year ago.

China Association of Automobile Manufacturers General Secretary Dong Yang pointed out that although all segments of the market experienced declines from April to May, passenger automobile production and sales figures were able to maintain positive year-on-year growth rates, while those of commercial vehicles were exactly the opposite.

Based on experiences last year, both manufacturers and dealerships held high expectations for performances this May, however the market failed to live up those expectations. China Automobile Dealers Association Deputy (CADA) Secretary General Luo Lei believes that the fact that the majority of new vehicles that debuted at April's Beijing Auto Show are to be released later in the year, many consumers are choosing to hold off on automobile purchases for the time being.

There is even more worry that increasing 4S dealership inventory levels will keep June's figures under May's, as the market enters a slump. The CADA's most recent study on the state of Chinese automobile dealership inventory warning levels assigned a warning level of 49.3 percent for dealership inventories in May, up 3 percent points from April and dangerously close to the 50 percent mark. Mr. Luo attributes the rising inventory levels to falling consumer demand. Meanwhile China Passenger Car Association General Secretary Rao Da believes the inventory increases are the result of severe monopolistic policies on the part of manufacturers.

Low number of consumers, increasing financial costs and capital pressures are among the factors cited by analysts for the poor performance of dealerships in May. "Although June is the last month of the first half of the year, [the fact that] inventory levels have greatly increased over the first five months [of the year] will keep a lot of inventory pressure on manufacturers in June," Mr. Rao said. "Therefore, sales volumes this month will in no way be better than those of May," he stated.