China Auto Market in tough test in May

　　Automobile market or a sharp adjustment in May will usher in "the test"

　　According to Guangzhou Daily, To the auto companies and dealers, this May, “good old days” lasted nearly one and a half year finally ended. They have to readopt the incentive measures such as lowering down the prices and giving out gifts to fawn on the customers to increasingly heavy pressure on stocks.

　　May 12, confronted with about 150 new cars in its own parking place, one car dealer of a local brand in Guangzhou seemed quite worried, “These are tasks of the auto manufacturers, we have no other tactics but for price promotions.”。

　　This is only a microcosm of the current auto market. Till the end of April, new car inventory of the car manufacturers disclosed by the official has reached 547,500 units. If dealer inventory is added, this figure may be twice more. The aggressive expansion of auto manufacturers, overdraft after the crazy market consumption and dealers’ increasingly heavy pressure all demonstrate the right time for China auto market underwent explosive growth in the year of 2009 to adjust is coming.

　　Data is unreliable

　　Just look at April’s data, in which production and sales reached 1.5635 million, and 1.5552 million, up 34.61% and 34.37% compared with last April respectively, the perspective of China auto market is still quite bright. Meanwhile, in the most concerned passenger car market, the production and sales reached1.1426 million, and 1.1109million, up 39.19%and 33.21% compared with last April respectively. In traditionally off-season like April, such performance of China auto market can be said perfect.

　　However, just the statistical data on manufacturers’ wholesale is far from enough. Standing on the front line of auto market, dealers have sensitively felt the transformation of the market supply and demand. One dealer in Guangzhou, who preferred not to be identified, said in an interview, “These data are basically of no reference value. Maybe the registration number is more unreliable. But we can not have it. Look at this number, although this model has been sold out about 10,000 units in April, actually only in our store there are dozens in stock.”

　　The same situation occurs not only in Guangzhou auto market, but also in the second and third tier cities that has been really hot during these two years. There distributor inventory now has already become the most worrying problem. May 8, in the city of Yantai, the reporter saw almost the garages of every 4S shop were filled with new cars. “We can only slowly deal with these hard tasks from manufacturers.” one staff members said.

　　Price war breaking out quietly

　　The pressure imposed on the auto dealers by the inventories can be easily seen. Suppose one new car takes up 100,000 Yuan, 100 units mean 10 million Yuan. Under the general state that dealers maintain operating by debts, clearly such pressure is unbearable. Therefore, price war has to become a necessary option.

　　May 12, one dealer selling American brands in Guangzhou told the reporter, “Obviously interest concessions are inevitably. But the mounts can not be released. I can only say that it will be even more favorable more than last month.” Last week, the reporter visited the traditional famous location in Guangzhou auto market such as the Racecourse Motor City and a specific street of auto 4S shop on Huangpu Road East only to find that interest concessions have become popularized already.”

　　Compared with the previous style that distributors cut down prices sneakily, this time FAW Mazda’s price cuts seem much more confidently. May 7, FAW Mazda announced that with the support of manufacturers, the price of Mazda 6 sedan is cut down by 30,000 Yuan. FAW Mazda said in the official press release like this, “The first shot of price cuts in the 2010 auto market finally broke out.”

　　This is an exciting signal to consumers. After the auto market had been bullish for nearly a year and a half because of short supply, ultimately, consumers the twilight of the victory of the seesaw battle. Not only their time will not be wasted on waiting for cars, but also the prices are cutting down. Such kind of happiness just came too suddenly.

　　“The current price cuts are only tentative. It is estimated in June and July the auto market will usher in more large-scale price cuts. Maybe then will the best time to purchase cars.” Xiang Songhan, a senior auto analyst told the reporter during an interview.

　　May perhaps the turning point

　　Price reduction, inventory digestion and pulling the consumer back to 4S shops are the only choices for auto dealers confronted with increasing market pressures. However, for the unstable auto market, simple price cuts will be difficult to clear the squeal of unreasonable explosive growth. The manufacturers’ impulse to expand capacity and the rising growth rate still being advocated by major agencies are bringing along huge risks to China auto market. If manufacturers can not respond properly in May, in 2010 China auto market may undergo severe adjustments and May could even become a “turning point”.

　　May 12, Bin Xie, managing director of Guangzhou Xin Huilong Car Sales Corporation said in an interview, “presently the pressure of distributors is really very heavy. And various brands have a large number of inventories. What’s more, customers dropped by this month have been obviously much less.”

　　Compared with dealers’ worries, the major Chinese and foreign institutions are still encouraging the manufacturers’ impulse to expand capacity. At Beijing Auto Show at the end of April, many institutions promoted their forecasts from15 million at the beginning of this year to 17 million, in hope of China auto market to fight for greater achievements after became the world’s largest car market in 2009. Driven by this kind of optimism, major domestic enterprises have announced expansion program. Roughly calculated, till 2010, China car production capacity would have already approaching 30 million, which is really an amazing figure.

　　Can China auto market increase at such an unlimited growth forever? At 2010 Beijing Auto Show, Ren Yong, deputy general manager of Dongfeng Nissan’s frankly talking was quite interesting, “no matter how fast, trees can never top the sky.” “We note that in April the stocks of some brands have emerged already and market pressures have been quite large. However, the slow adjustment cycles of some companies for instance, three months, will make their market reaction slow as well. ”Ren Yong added.

　　“This month’s performance is very important because we can only say that the market is undergoing adjustment rather than general direction has been changed. However, if the manufacturers ignore the market pressure and continue to expand production, then the terminal prices can not kept , which will perhaps lead to a turning point.” a senior auto analyst Xiang Songhan said so.

　　(Translator: Yalong/Jessie)

　　See original Chinese report Please click:

　　http://auto.sohu.com/20100517/n272154432.shtml