Car inventory coefficient falls below the warning line

A few days ago, the China Automobile Dealers Association released the results of the inventory survey of car dealers in January this year. According to the data, the comprehensive inventory coefficient of automobile dealers in January was 1.2, a 22% decrease from the previous month and a year-on-year increase of 24%. The inventory level of dealers was below the warning line and the inventory pressure eased.

According to reports, in January, dealers were in the destocking state, especially dealer groups, and the ability to destock was stronger than single-store dealers. In addition, most manufacturers held dealership conferences in January to condense their efforts to boost morale. It is worth mentioning that most manufacturers did not make rigid demands on the amount of vehicles that were collected in January.

Luo Lei, deputy secretary-general of the China Automobile Dealers Association, said that due to the increase in sales during the Spring Festival in February and the end of January, market demand has also increased significantly. In addition, the strong growth of self-owned brands in January highlighted their outstanding performance. “Because of the Spring Festival consumption cycle and the strong impulse of independent self-improvement, the final sales growth exceeded expectations. Overall, dealers’ inventory destocking and demand for pre-holiday car purchases contributed to the increase in sales volume in January.” Luo Lei Say.

Car dealers inventory survey results show that in January, the joint stock, independent, imported brand inventory coefficient has dropped significantly, the joint brand inventory coefficient decreased from 1.37 in the previous month to 1.03, a decline of 25%; independent brand inventory coefficient decreased from the previous month of 1.81 1.19, a month-on-month decrease of 34%; import brand inventory coefficient decreased from 2.02 in the previous month to 2.01, which is basically the same as last month. The level of imported brand inventory is still above the warning line.

It should be noted that in the fourth quarter of last year, self-owned brands did not oversprint sales targets, and joint venture brands overdrawn their sales in January of this year in December 2014, making the independent brands’ performance relatively prominent and inventory levels dropping significantly.

According to the prevailing practice of the same industry in the world, the inventory coefficient is between 0.8-1.2, which reflects the inventory is in a reasonable range; the inventory coefficient is higher than 1.5, which reflects that the inventory has reached the alert level and needs attention; the inventory coefficient is higher than 2.5, reflecting the overstocking and operating pressure. And the risks are very big.

Luo Lei believes that, at the end of 2014, manufacturers generally pressed dealers to complete sales targets for the whole year, resulting in increased inventory pressure from distributors, increased pressure on dealers' survival, and collective boycott of factory press activities, especially for luxury brand dealers. With large quantities, the challenge of surviving is even greater. They have communicated with manufacturers through various channels. In January 2015, most manufacturers did not make rigid demands on the dealers' car collection volume. Coupled with the increase in consumer demand years ago, dealer inventory pressure was significantly eased.

“The Spring Festival holiday will lead to a decrease in market demand and a decrease in sales volume. Dealers should reasonably control the amount of vehicles to be taken in the near future to prevent excessive pressure on stocks.” Luo Lei suggested.