China Automobile Dealers Association: my country's automobile dealer inventory warning index in May 2020

On May 31, the China Automobile Dealers Association released the inventory warning index of my country's automobile dealers in May this year. The data showed that the dealer inventory warning index in May was 54.2%, down 4.6 percentage points from the previous month and up 0.4 percentage points from the previous year, still above the boom-bust line. During the May Day holiday, the substantial price reduction promotions and the release of policy dividends drove the recovery of passenger flow and sales, but also overdrawn the market demand in the second half of the month. Even though the margin of profit was increased, the sales growth slowed down.

After experiencing the turmoil of the epidemic, sales in May showed a good recovery trend. The recovery of the auto market is mainly due to policies and the replenishment of previous demand, but the concentrated release of demand will also overdraw some sales in the second half of the year.

According to the inventory warning index and dealer biweekly data survey, the sales growth brought about by the release of demand has begun to decline since May and June. It is estimated that the terminal sales of passenger cars in May will be 1.55 million units, a month-on-month increase of about 10%, and the month-on-month growth rate has further narrowed.

Considering the switch from National V to National VI in June last year, sales surged abnormally. Given the large base in the same period, the market faced greater growth pressure in June this year, with sales of about 1.6 million units, narrowing to about 3% month-on-month, and a significant year-on-year decline. If there is no continued support from favorable policies, the auto market in the second half of the year will still be grim.

Through investigation, we know that even in the post-epidemic period, the popularity of online car sales has not dissipated, but the number has decreased relatively. At present, most 4S stores live broadcasts have become the best way for users to view and choose cars online, but the actual transaction volume is small, which can only increase the popularity and exposure of 4S stores. As a bulk commodity, car consumption is absolutely rational. Online car sales should still be used as a means of acquiring customers and collecting clues.

The immediacy, interactivity and convenience of live broadcasting can not only become a channel for users to learn about car models in advance, but also enhance the online marketing service capabilities of 4S stores, while complementing the offline sales model of 4S stores. Online customer acquisition + offline sales can better improve the transaction rate and conversion rate, and help the recovery of the auto market.

After the auto market continued to pick up in April and May, dealers' inventory expectation index for June was 53.6%, up 2.5 percentage points from the previous month, reflecting a decline in dealers' confidence in the auto market in June.

The survey showed that dealers believed that the number of customers in June decreased , with 33.1% of dealers believing that it decreased, 51.9% believing that it remained the same, and 15.0% believing that it increased.

In May, price reduction promotions and the release of policy dividends led to a rebound in passenger flow and sales, but it is worth noting that passenger flow has dropped significantly after the holiday. Despite increased profit concessions, market performance remains weak, and it is expected that passenger flow will show a downward trend in June.

The survey showed that dealers believed that the total market demand decreased in June , with 30.0% of dealers believing that it decreased, 55.1% believing that it remained the same, and 15.0% believing that it increased.

As manufacturers and dealers have launched various promotional activities, consumer demand has been further released, but sales have also been overdrawn in advance, suppressing sales in June. At the same time, after the epidemic has eased, the assessment tasks of manufacturers have gradually become heavier. July to September is the off-season for automobile sales, and dealers are under increasing inventory pressure. In order to complete the assessment tasks, inventory must be digested in June, and sales have to be driven by promotions and price-for-volume methods to further tap into market demand.

2. Dealers’ liquidity pressure is relieved

The survey showed that dealers believed that their liquidity situation in May was average , with 23.3% of dealers believing that it was tight, 60.6% believing that it was average, and 16% believing that it was sufficient.

At present, the market and dealer operations have basically returned to normal, the sales volume in the terminal market has also been greatly boosted, the inventory pressure has been well digested, and the financial pressure of dealers has been alleviated. It is recommended that dealers continue to do a good job in fund management, control costs and expenses, and reduce operating risks.

3. The employment situation of dealers is basically stable

The survey showed that dealers expected the number of employees to remain the same in June , with 12.5% ​​of dealers believing that it would decrease, 78.7% believing that it would remain the same, and 8.7% believing that it would increase.

The automobile market has basically recovered, and the overall employment situation is stable, with no large-scale layoffs. However, during the investigation, we learned that some car companies have lost some employees due to adjustments or reductions in job establishment, and some employees are not strong, and the personnel problem is slightly serious. It is recommended that 4S stores strengthen the organization of personnel and improve marketing capabilities and overall operational capabilities.

The entire auto industry is facing challenges during this special period when the epidemic has affected the economy and downward pressure is still high. Gradually loosening restrictions on purchases and issuing car purchase subsidies are important means to boost auto consumption.

It is understood that Beijing, Shanghai, Tianjin, Guangzhou, Shenzhen, Hangzhou, Guiyang and Hainan Province's restricted areas have all introduced policies to increase the total number of license plates. For example, Beijing added 20,000 new energy vehicle quotas in August this year and launched a new lottery policy for "car-free families", Tianjin will increase 35,000 passenger car quotas this year, and Hangzhou will increase 20,000 passenger car quotas in 2020. Preliminary estimates show that the number of additional license plate quotas in all restricted cities is close to 300,000, which will provide certain support for automobile consumption in first-tier cities.

As the pillar of the national economy, the automobile industry is the focus of the two sessions. This year, many CPPCC members and NPC representatives of Chinese auto companies have announced proposals and suggestions on the eve of the two sessions, including how to promote the development of the Chinese auto market, Chinese auto brands, and the new energy auto industry, and improve the convenience of consumers owning/using cars and the traffic environment.

Judging from the proposals, the release of "relaxing car purchase restrictions", "reducing and exempting car purchase taxes", "optimizing car consumption subsidy policies" and other content has a strong stimulating effect on the car market and has an immediate effect on promoting car sales growth. Canceling or relaxing purchase restrictions is the most direct, effective and lowest-cost solution, which can release a large amount of demand with purchasing power and benefit the development of the auto industry.

Supported by policies, the auto market is gradually recovering from the impact of the epidemic. If we want to change the sluggish state of the auto market in the future and see the bright moon through the clouds, we still need to analyze and respond to the market, actively face various challenges and risks, strive to transform, and seek common development.