BEIJING – China passenger vehicle prices fell the most in about two years because of a worsening glut at auto dealerships, the nations top economic planning agency said.
Average retail prices in May fell 1.1 percent from April, the steepest sequential drop since June 2010, Cheng Xiaodong, head of auto-price monitoring at the National Development and Reform Commission, said last week in a telephone interview. Automakers are overstocking cars at a time when dealers are pessimistic about their sales prospects, he said.
Chinese consumer demand for cars is lagging behind the rising wholesale vehicle deliveries that automakers are reporting. Chinas biggest dealer association said last week that carmakers need to scale back sales targets or sweeten incentives because the worsening glut across the nations showrooms is unsustainable.
The market is deteriorating quickly, said Vivien Chan, an analyst with SinoPac Securities Asia in Hong Kong. Price declines are no doubt adding more pressure on auto dealer stocks.
Zhongsheng Group Holdings, a Beijing-based luxury car dealer, fell by as much as 6.1 percent in Hong Kong Tuesday, and Baoxin Auto Group declined as much as 3.4 percent to a record low of HK$5.25.
In the auto industry, month-on-month comparisons better reflect the health of vehicle demand than year-on-year data, NDRCs Cheng said. Prices in May dropped 1.7 percent from a year earlier, deepening from April and in line with the drop in March, according to NDRC data.
Average inventory carried at Chinese showrooms exceeded two months of sales by the end of May, compared with more than 45 days at the end of April, Luo Lei, deputy secretary general of the state-backed China Automobile Dealers Association, said in an interview on June 6.
Three days later, the official China Association of Automobile Manufacturers reported that wholesale deliveries of passenger vehicles in May climbed 23 percent from a year earlier to 1.28 million units, defying an economic slowdown thats forced China to cut interest rates, loosen lending restrictions and pursue stimulus measures.
The auto shipments beat the 1.2 million average of seven analyst estimates in a Bloomberg survey, the third straight month shipments exceeded projections. Automakers, also known as original equipment manufacturers, only disclose the number of vehicles sold to Chinese dealers – instead of consumers.
We think this is a very dangerous strategy of the OEMs channel stuffing the dealers in the hopes of selling more, said analysts Ole Hui and Jeremy Yeo.