Capacity reduction aggravates in China, automakers need prepare for sales downturn “winter”

Faced with growth rate lower than expected and high inventories, auto enterprises have to stabilize operation restricting their urge to expand. They should explore new business form consolidating electrical contractors and 4S system, so as to assure the profit of dealerships. Among these measures, the most urgent and important one is to help reduce the inventory of dealerships.

In order to cut inventory, automakers are adjusting capacity. According to the data issued by China Passenger Car Association, the general passenger vehicle production in July decreased from the previous month by 17.8 percent, representing a reduction of 13 percent compared with the same period of last year.

In July, FAW-Volkswagen and Shanghai GM have clearly lowered their capacity. In specific, FAW-VW decreased production by more than 30,000 vehicles in July, with reduction rate reaching 30 percent. A plant of SAIC-GM has cut production volume by tens of thousand vehicles, falling 40 percent compared with the same period of last year.

It has been reported that Beijing Hyundai has planned to adjusted production to 10 percent lower than the same period of last year. Ford China also applied the same method to reduce the inventory pressure of dealerships.

The round after round of price reduction storms haven’t brought much improvement to sales. Automakers, thus, wish the capacity reduction can take effect on the sales growth.

Accompanied by the market downturn, it comes with various car sales plunge in many automakers. Even the previous strong German and American car companies could not escape the fate of sales slump. Therefore they have downgraded full-year expectation for China's auto market.

High inventory, price escalation, automakers cut production revealed the bad performance of China's auto market. And the recession in Chinese auto market is expected to be ensuing. The market slowdown brought to the car companies more intense competition.