The China Automobile Dealers Association (CADA) revealed that 35 percent of carmakers had too large an inventory in the third quarter of 2010, according to Southern Metropolis Daily Wednesday.
487 4S shops from over 20 brands in the country were investigated, and 35 percent of them were proven to have an inventory index (inventory of the month/ sales of the month) higher than the safety level, which is 1.2.
Chen Dihong, vice secretary of CADA explained that a regular index points is in between 0.8 and 1.2. And if the number is higher than 1.2, then dealers may suffer great pressure on sales. An index lower than the normal level shows a tight in supply.
Seven automakers: Geely Automobile, Beijing Benz, BMW Brilliance, Dongfeng Peugeot-Citroen, Guangzhou Honda, Guangzhou Toyota, FAW Toyota, have an index higher than 1.2. Inventory indexes of Geely and Beijing Benz are as high as 2, which means that the inventories of the two companies equal sales of two months. Beijing Benz's even reached 2.7 in July.
Shanghai GM's and FAW Mazda's were lower than 0.8 in September. Cao Hong, manager of a FAW Mazda store in Guangzhou introduced that the stocks have been out of supply since a price reduction of Mazda 6. Generally customers have to wait for two weeks before they can get the car, said Cao.
An unnamed analyst said the report is a good reference for predicting auto prices in the next quarter. "Inventory index is inversely proportional to its final price. The higher the index, the larger the sales pressure. The dealers have to reduce price in order to sell more vehicles." Song Tao, an official from CADA explained. Overcapacity may be a big problem, and it can threaten the Chinese auto industry.
