China has 500,000 new passenger cars unsold

Shanghai, December 9 (Gasgoo.com) Due to the slowing market demand, inventories of unsold new vehicles in China have risen to 500,000 units or more, said National Business daily today, citing industry experts.

From January to November, nearly 6,15 million passenger vehicles were produced in China and 360,000 of them are still unsold. Except those for exports, up to 200,000 passenger vehicles are staying in the stockpiles of automakers and waiting for wholesale. In the auto market, dealers still have about 300,000 passenger vehicles in their stockrooms. The combined inventories reached at least 500,000 units at the end of November.

The backlog of automakers came to 170,000 vehicles as of the end of June, the highest since a previous peak of 200,000 at the end of June 2004. But the backlog has risen much higher in the second half largely due to the financial crisis. Over the past few months, consumer demand and sales growth have slowed down after many automakers had expanded output.

Analysts blamed the rising stockpile on slowing growth in the world's second-largest auto market, hit in part by natural disasters, particularly May's devastating earthquake in southwest China, the Beijing Olympic traffic control and the global financial crisis, all of which, among other factors, dampened consumer confidence.

In the first half of the year, passenger car sales in China increased 17 percent to 3.61 million units, after growing more than 20% annually since 2005, and at the same time, production capacity had been surging. But the sales have dropped sharply in the second half. In November, China's passenger car sales fell 10.3% from a year earlier.

The mounting stockpiles are a heavy burden on the car makers and dealers alike, financially and psychologically. Most auto dealers have great difficulty taking out loans from the banks and are in urgent need of cash flow. Some stores are going to close down.

The average monthly fees needed for storing each passenger car in the inventories is up to 3,000 yuan ($436) and this means the backlog of 500,000 vehicles will consume a total of 1.5 billion yuan each month before they are sold.