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51% Inventory Alert Index in May Might Rebound in June

Date:06-15 16:09 Source:China Economic Net Authour:Guo Tao

According to the data issued by the China Automobile Dealers Association (CADA) (on June 3rd), the inventory alert index in May 2016 was 51.0%, down by 6.9% compared with April and one percent above the warning line. This is also the lowest point the index has hit since last September.

51% Inventory Alert Index in May Might Rebound in June

The inventory alert index in May 2016 was 51.0%.

In the aftermath of the auto shows held in various areas this spring, the inventory alert index for dealers in May reached the lowest point since last September. However, as the auto market will soon enter the off-season, and as automakers start the rush to achieve mid-year sales targets, dealers will come under great pressure in June.

51% Inventory Alert Index in May Might Rebound in June

According to the data issued by the China Automobile Dealers Association (CADA) (on June 3rd), the inventory alert index in May 2016 was 51.0%, down by 6.9% compared with April and one percent above the warning line. This is also the lowest point the index has hit since last September.

Lang Xuehong, Deputy Secretary General of CADA, indicated that he had learned from dealers’ feedback that since Spring Festival this year, the whole market has found itself in a situation where sales cannot be achieved without promotional price cuts. The market conditions in May have just confirmed his observation.

Overall, the short-break May Day holiday and the spring auto shows held in various locations gave a major boost to the auto market in May. However, in June, it will hit the off season. Meanwhile, with automakers rushing to achieve mid-year sales targets, overstocking is already beginning, and inventory pressure on dealers will increase accordingly.

Judging from the sub-indexes composing the alert index, the inventory index and the employee number index fell on a month-to-month basis, while the indexes of market demand, sales, and operating conditions rose compared with those of April. Major changes are shown in the figure below:

51% Inventory Alert Index in May Might Rebound in June

In May, the total market demand index was 52.0%, up by 11.4% from April. The percentage of dealers who think total demand is growing increased to 31.4% from 17.0% in April, the percentage who think it basically remains the same fell to 33.3% from 42.1%, and the percentage who think it is dropping decreased to 35.2% from 40.9%.

In May, the inventory index was 53.8%, down by 5.1% from April. The percentage of dealers who think inventory is growing decreased to 35.8% from 37.4%, the percentage who think it basically remains the same decreased to 44.7% from 48%, and the percentage who think it is dropping increased to 19.5% from 14.6%.

In May, the daily average sales volume index was 51.1%, up by 13.6% from April. The percentage of dealers who think the sales volume is growing increased to 25.2% from 16.4%, the percentage who think it basically remains the same increased to 44.0% from 36.8%, and the percentage who think it is dropping decreased to 30.8% from 46.8%.

In May, the operating condition index was 45.3%, up by 6.1% over April. The percentage of dealers who think operating conditions are good increased to 11.3% from 5.3%, the percentage who think they are average decreased to 59.1% from 62.6%, and the percentage who think they are bad decreased to 29.6% from 32.2%.

According to the PMI indexing principle and the expansion index compilation method, the inventory alert index takes 50% as the boom-and-bust line. Indexes below 50% are all in the reasonable range. The higher the inventory alert index is, the lower the market demand will be, and the greater the inventory pressure and the operating pressure.

In terms of index setting, the comprehensive index is composed of the inventory alert index and other indexes closely related to changes in automobile inventory. These mainly include total auto market demand, volume of customer footfall in 4S stores, close rate, changes in price, sales volume, inventory, number of employees, working capital, and operating conditions.

The respondents to this dealer inventory survey are mainly the top 100 dealership groups in the Chinese automobile dealers industry in 2014, covering more than 1000 4S stores in most provinces in China and 55 brands of import, JV and domestic automobiles mass-produced and sold in the domestic market.


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