China Automobile Dealers Association: The auto dealer inventory coefficient is 1.40 in June 2024

On July 10, 2024, the China Automobile Dealers Association released the results of the "Auto Dealer Inventory" survey in June 2024: the comprehensive inventory coefficient of automobile dealers in June was 1.40, a decrease of 2.8% month-on-month and an increase of 3.7% year-on-year. The inventory level was below the warning line.

1. Inventory coefficient in June increased year-on-year but decreased month-on-month

In June, dealers rushed to achieve their mid-year targets by increasing sales promotions, the Dragon Boat Festival holiday and the "618" event, effectively offsetting seasonal challenges such as the busy farming season and high temperatures and heavy rains. With the implementation of the central government subsidy details for "trade-in cars", preferential measures for automakers and support from local government subsidy policies, the terminal sales volume of the auto market has achieved steady growth.

Pessimism among dealers spread. In order to ensure the safety of the capital chain, they strictly controlled the inventory level. In addition, some automakers entered the high-temperature holiday, and dealers' destocking effect was significant and returned to a reasonable range. It is estimated that the terminal sales of passenger cars in June were about 1.75 million vehicles. It is estimated that the total inventory of auto dealers at the end of June was about 2.5 million vehicles, and the inventory-to-sales ratio decreased.

2. High-end luxury, imported and joint venture inventory coefficients decreased, while independent inventory coefficients increased

The inventory coefficient of high-end luxury & imported brands was 1.03, down 11.2% month-on-month; the inventory coefficient of joint venture brands was 1.42, down 14.5% month-on-month; and the inventory coefficient of domestic brands was 1.53, up 8.5% month-on-month.

3. Brands with the highest inventory depth in June

This month is the mid-year sales node. As the price war continues to ferment, dealers have stepped up their efforts to clear inventory and accelerate capital recovery. Local governments and manufacturers have frequently issued policies to promote consumption, which has disrupted the sales rhythm and caused large inventory fluctuations. In view of this, the brand with the highest inventory depth will not be announced this month, waiting for the market to adjust and return to normal.

4. Cautiously anticipate market demand in July 2024 and reasonably control inventory

July is traditionally an off-season for automobile consumption. Due to the combined effects of hot and rainy weather and dealers' overdrafts in promotions in June, potential demand from July to August was diluted, putting pressure on the growth of auto sales.

Since the release of the central government subsidy details for "auto trade-in", as of July 4, the Ministry of Commerce's auto trade-in information platform has received about 170,000 applications for auto scrapping and renewal subsidies, with the number of applications growing rapidly at an average rate of 10,000 per day. According to dealer feedback, the proportion of consumers entering stores for consultation and closing deals was 20% and 10% respectively, and the number of inquiries increased by 10 percentage points compared with May. The policy dividend is gradually activating market potential. Overall, auto sales in July were flat year-on-year, and may have a slight decline compared with June.

The China Automobile Dealers Association suggested that dealers should rationally estimate the actual market demand based on the actual situation as the uncertainty of the future automobile market increases. At the same time, they should increase the publicity of the "old-for-new and scrapping and renewal policies", boost consumer confidence by strengthening services, put cost reduction and efficiency improvement first, and prevent business risks.