AutoBeta(AutoBeta.net)06/13 Report--

In May, China's auto market finally ushered in double-digit growth, the auto industry and the consumer sector entered a rapid recovery phase, a number of car companies are also looking forward to proportional sales growth, resulting in a continuous decline in dismal performance. However, the inventory level of some brand dealers is still high, manufacturers' wholesale sales are not proportional to terminal sales, and a total of five brands were named in May.

According to statistics from the China Automobile Association, China's automobile production and sales completed 2.187 million and 2.194 million respectively in May, up 4% and 5.9% month-on-month, and 18.2% and 14.5% respectively over the same period last year, which is also the double-digit year-on-year growth rate ushered in after many consecutive months of decline. However, from January to May, China's car sales still fell 22.6% from a year earlier to 7.957 million units.

The latest survey of "Automobile Dealer inventory" released by the China Automobile Circulation Association in May 2020 shows that the comprehensive inventory coefficient of automobile dealers in May was 1.55, down 6.1% from the same period last year and 11.9% from the previous month. Inventory levels are very close to the warning line of 1.5, and dealer inventories have also fallen sharply compared with previous months.

Even though overall inventories have fallen, five brands have been named. There are five brands with dealers' inventory depth of more than two months, namely Geely Automobile, SAIC Roewe, Dongfeng Infiniti, Guangzhou Auto Fick and GAC MOTOR. Among them, Geely's dealer inventory reached 2.29 months.

Geely Automobile is currently the largest independent car company in terms of sales. According to official figures released by Geely, Geely sold a total of 108800 vehicles in May, up 20 per cent from a year earlier. From January to May, Geely sold 420000 vehicles, down 25 per cent from a year earlier, and has so far achieved 30 per cent of its annual sales target. Geely said Boyue and Boyue sold 20, 000 PRO vehicles in May, with more than 10, 000 colorful crossovers, while the new model ICON sold 3360 in May, while the Lecker brand sold about 13000 in May.

With the rapid growth of sales, there are also some risks behind it. Geely dealers' inventory level reached 2.29 months in May, making it the highest inventory brand in the month and well above the industry average of 1.55 months, according to the association report.

While pursuing the target completion rate of sales, car companies often take the cost of increasing the inventory pressure of dealers, but it is not conducive to sustainable development. Therefore, the association suggests that in the post-epidemic period, dealers should rationally estimate the actual market demand and reasonably control the inventory level according to the actual situation, so as to prevent excessive inventory pressure and lead to operational risks.

The second highest inventory is also occupied by an independent car company. The inventory level of SAIC Roewe dealers reached 2.18 months in May, which also reflects the imbalance between wholesale sales and terminal retail sales. According to KuaiBao, SAIC Group, SAIC sold 52257 passenger cars (Roewe and Mingjue brands) in May, down 5 per cent from a year earlier, while cumulative sales in the first five months were 193165, down 26.2 per cent from a year earlier.

Roewe brand lack of continuous new product launch, in order to enhance the brand image, SAIC issued a new "Lion Standard" in April this year, which will be applied to the next new products.

Dongfeng Infiniti is the only luxury brand on the list, with dealers having inventory of 2.03 months in May, ranking third in inventory. In 2020, Dongfeng Infiniti continued to stall, and sales have declined for many months in a row, with cumulative sales of only 6233 vehicles from January to May, down 42.2% from the same period last year.

In the stage of sustained high growth of the overall luxury car market, Dongfeng Infiniti obviously lags behind. According to the relevant report, luxury car retail sales rose 28% in May from a year earlier, and the high-end demand for upgraded consumption led to a rapid pick-up in the luxury car market.

Due to the stagnation in the introduction of new cars and a decline in sales, it was reported not long ago that Dongfeng Infiniti has made substantial layoffs, relevant business departments and offices will also be relocated or closed, and will also be "merged" with Dongfeng Nissan to reduce costs. Even if Infiniti responded with "false reports" and "will not withdraw from the Chinese market", the development dilemma has been haunting the Japanese luxury joint venture car company.

In addition, the dealer inventory levels of two Guangzhou automobile enterprises-Guangzhou Auto Fick and GAC MOTOR have also exceeded 2 months, which is a dangerous signal for manufacturers. Among them, GAC MOTOR has been on the list for many months in a row, and Guangzhou Auto Fick is also one of the very confused joint venture car companies in recent years. Guangzhou Auto Fick's cumulative sales from January to May this year were 14419, down 53 per cent from a year earlier.

The high inventory of dealers often reflects the decline of enterprise sales. The association believes that at present, the assessment task of manufacturers' sales volume is increasing, the inventory pressure of dealers is increasing, and dealers rely on substantial preferential activities to accelerate inventory digestion and boost the terminal market by way of price for quantity. Although the inventory pressure of some brands has slowed down in a short period of time, it has overdrawn the market demand ahead of time, and it may face greater sales pressure in the following traditional off-season.

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