Gasgoo Munich- The China Automobile Dealers Association (CADA) released data on February 28 showing the inventory warning index for China's auto dealers stood at 56.2% in February 2026. While that represents a decline of 0.7 percentage points year-on-year and 3.2 points from the previous month, the figure remains above the critical 50% threshold—signaling that operational pressure persists across the industry.
Image Source: China Automobile Dealers Association (same below)
According to the association's analysis, the Lunar New Year holiday weighed heavily on terminal retail in February. With fewer effective selling days and a sharp drop in store footfall—compounded by adjustments to new-energy vehicle purchase tax policies and consumer anticipation of spring auto show discounts—cautious sentiment deepened. As a result, 76.8% of dealers reported missing their sales targets for the month. However, the implementation of the Compliance Guidelines for Price Behavior in the Automotive Industry has helped alleviate price inversions, where vehicles are sold below cost. Notably, 25.6% of dealers indicated this situation had eased, while 20.7% reported improved profitability.
Breaking down the sub-indices: dealers intensified pre-holiday destocking efforts and tightened purchasing rhythms, causing the inventory sub-index to fall month-on-month and easing some pressure on stockpiles. Conversely, indices for market demand, average daily sales, and staffing all rose. The post-holiday market recovery proved stronger than anticipated, though the business conditions index retreated from the previous month.
Regionally, disparities remain stark. The East led with the highest index at 58.9%, while the North posted the lowest at 51.8%, highlighting a continued split in market performance across regions. By brand type, the index for luxury and imported marques climbed month-on-month, as some manufacturers cut official guide prices to relieve market stress. In contrast, indices for mainstream joint ventures and domestic brands declined.
Dealers' core pressure points remain concentrated on price inversions for new vehicles and losses on gross margins per unit. Some dealers have seen inventory depths deepen and liquidity tighten due to manufacturers pushing stock onto lots. Yet, when factoring in finance, derivative businesses, and manufacturer rebates, the overall operational pressure on dealers has eased slightly.
Looking ahead to March, the association notes dealers are adopting a cautious stance. While terminal footfall and sales volumes are expected to recover month-on-month—driven by the return of post-holiday consumption, the launch of spring auto shows, new model releases, and clearer local subsidy procedures—the pace of recovery will likely be moderate. Pre-holiday demand overdrafts and lingering consumer caution mean pressure on profitability is set to continue. The association advises dealers to estimate market demand rationally, ramp up promotion of trade-in and scrappage policies, and boost consumer confidence through improved service. Above all, it emphasizes prioritizing cost reduction and efficiency to guard against operational risks.
