China Automobile Dealers Association: China's auto dealer inventory warning index is 61.8% in January 2023

In January this year, there were two holidays, New Year's Day and Spring Festival, with shorter effective working days. In addition, the purchase tax of fuel vehicles was halved in December last year and the national subsidy policy for new energy vehicles expired. The market overdraft effect appeared in January this year. However, due to the adjustment of epidemic prevention policies, the demand for car purchases before the festival was higher than expected. According to feedback from dealers, the number of consumers visiting stores to view and select cars during the Spring Festival exceeded expectations, but the prices of some models were raised or the discounts were narrowed. Consumers were more in a wait-and-see state and were not in a hurry to buy cars. It is expected that the overall automobile market will be stable in January, with terminal sales of passenger cars at around 1.4 million units.

The sales rhythm of dealers in January was disrupted. At present, manufacturers have withdrawn or reduced their year-end promotion policies, and dealers are not willing to promote sales. They have accumulated orders to ensure that sales in February after the holiday will meet the target. It is expected that the prosperity of the automobile distribution industry will improve in February.

From the perspective of sub-indices: the survey shows that in January, the inventory, market demand, and average daily sales indexes decreased month-on-month, while the employee and business conditions indexes increased month-on-month. This reflects that the overall inventory level has decreased, but due to the Spring Festival holiday, market demand and transaction volume have declined. After the adjustment of the epidemic policy, consumer confidence has recovered, the exhibition hall has attracted better customers than expected, and the operating pressure has been relieved.

From the regional index situation: In January, the national total index was 61.8%, the northern region index was 60.6%, the eastern region index was 67.5%, the western region index was 48.9%, and the southern region index was 61.0%. The southern region index increased significantly compared with the previous month, mainly due to migrant workers returning home for the holidays, and some dealer showrooms suspended business or rotated shifts.

Looking at the brand type index: In January, the import & luxury brand and domestic brand index decreased month-on-month, while the mainstream joint venture brand index increased month-on-month.

Market prediction for next month: In February, people returned to work in the city after the Spring Festival, and consumers' enthusiasm for buying cars cooled down. Passenger flow decreased slightly after the festival, but the accumulated orders in January will be delivered one after another, and it is expected that the car sales in February will be better than that in January.

Regarding the judgment of the auto market in 2023, more than 90% of dealers believe that the auto market will recover in an orderly manner, and nearly 50% of dealers believe that the auto market will recover in the second quarter of 2023, especially in the second half of the year. The auto market will show a significant recovery growth. Most dealers believe that the annual passenger car sales growth rate will be within 5%.

The China Automobile Dealers Association recommends that as the uncertainty in the automobile market increases in the future, dealers should rationally estimate actual market demand and reasonably control inventory levels based on actual conditions.

Appendix: Automobile Dealer Inventory Early Warning Index Survey Description and Regional Division Standards

1. Survey description of automobile dealer inventory early warning index

The China Automobile Dealers Association proposed the construction of an "inventory early warning system" as early as March 2010, and began to conduct regular inventory surveys of automobiles and dealers in July 2010. In 2012, in order to more proactively reflect industry trends, the association built an automobile dealer inventory early warning index after more than half a year of research.

The purpose of the automobile dealer inventory early warning index survey is: first, to grasp the pulse of the market. By investigating the inventory status of automobile dealers of various brands across the country, we can timely grasp the overall status of the industry and predict future market trends; second, to assist in regulatory decision-making. By understanding the changes in dealer inventory, we can provide accurate information for relevant departments to formulate regulatory measures. Third, to monitor operational risks. Timely reflect the fluctuations in production and sales in the automobile market, provide reference for manufacturers to reasonably arrange production plans, and for dealers to formulate marketing strategies and control operational risks.

According to the principle of PMI compilation, the inventory early warning index adopts the method of compiling an extended index, with 50% as the boom-bust line. Anything below 50% is within a reasonable range. The higher the inventory early warning index, the lower the market demand, the greater the inventory pressure, and the greater the operating pressure and risk.

In order to enhance the forward-looking and predictive functions of the inventory early warning index, the ideas and methods of constructing the PMI index are used for reference. The inventory early warning index selects indicators that are closely related to changes in automobile inventory to form a comprehensive index. The relevant indicators mainly include: total demand in the automobile market, customer volume of 4S stores, transaction rate, price changes, sales volume changes, inventory changes, changes in the number of employees, working capital status and operating conditions.

The dealer inventory survey this month is mainly conducted on the top 100 dealer groups in China's automobile distribution industry in 2016. It covers more than 1,000 4S stores in most provinces across the country and has a wide range of brand coverage, including 55 major imported, joint venture and independent automobile brands that are mass-produced and sold in the domestic market.

2. Regional division standards

The northern region includes provinces and regions: Beijing, Hebei, Henan, Heilongjiang, Jilin, Liaoning, Inner Mongolia, Shanxi

The southern region includes provinces and regions: Fujian, Guangdong, Guangxi, Hainan, Hubei, Hunan, Jiangxi

The Eastern Region includes provinces and regions: Anhui, Jiangsu, Shandong, Shanghai, Tianjin, Zhejiang

The western region includes the following provinces and regions: Gansu, Guizhou, Shaanxi, Sichuan, Xinjiang, Yunnan, Chongqing, Ningxia, Qinghai, Tibet