Chinese dealers call for auto brands to balance inventory levels to help ease glut

SHANGHAI/BEIJING, Jan 14 (Reuters) – Some Chinese auto brands are continuing to push excess inventories to dealers, the country’s car dealers’ association said, urging them to correct the practice to improve the industry’s health.

The China Automobile Dealer Association (CADA) did not name the brands and said it decided not to disclose the top three brands with the highest inventory levels in December, an unusual move by the group that has been routinely publishing the ranking on a monthly basis as it monitors inventory levels industry-wide.    

Chinese auto dealers have been urging automakers to stop offloading too many cars on dealerships, as intense price wars are pressuring their cash flow, driving down profitability and forcing some to shut. Chinese authorities have vowed to stop price wars and rectify practices that were damaging the industry’s health.

A survey by CADA in August showed 29.9% of the dealers in China were profitable while 52.6% said they were making losses.

Automakers usually rush to push more inventory to dealers at year-end as they rush to achieve their annual sales targets to meet the expectations from investors and governments. 

Average December inventory level at dealers declined from November as most automakers adopted a prudent wholesale strategy, though inventories were still higher than a reasonable level of 1.2 months,  CADA noted in a statement released late on Tuesday.

Some automakers had offered incentives to dealers to take more inventory even though the retail sales were weaker than expected, leading to temporary fluctuations, the association said.  

Dealers had a total inventory of an estimated 3 million vehicles at the end of December, CADA said. 

China’s car sales are expected to continue to slow down with forecasts suggesting stagnation for this year, while robust electric vehicle exports are unlikely to last, a Chinese industry association said earlier this month.

(Reporting by Zhang Yan and Ju-min Park; Editing by Lincoln Feast.)