Chinese Dealers Drowning In Cars! Gasp! 60 Days Of Inventory!

The New York Times carries a long story today that chronicles changes in the Chinese car market. Written by Reuters automotive specialists Norihiko Shirouzu and Fang Yan, it is a story of China where you now get a discount and instant delivery for a BMW instead of having the option to pay 20 percent more, or wait a few month for delivery.

The car market in China, says the article, is becoming more like that in the United States, where most of the money is made in financing, insurance and maintenance. Indeed it is.

What seems to be shocking to a Chinese dealer will sound quite familiar to his American counterpart. Says the New York Times:

“BMW dealerships in Guangdong Province, an export hub in southern China that has been hurt by the euro zone debt crisis, have as much as 90 days’ worth of stock, more than double normal, and the 5-series now carries a discount of 25,000 renminbi, or $3,900 — 5 percent of list price, dealers say.”

Reuters found one case where a Mercedes Dealership had to offer a nearly 30 percent discount to move a S-Class 300 sedan. European dealers will be jealous. There, we learned that 30 percent are considered normal for bread and butter cars of Fiat and Opel.

Rajeev Chaba, a senior sales and marketing executive in Shanghai for GM, said average inventory levels for the industry had ballooned to 60 to 75 days, up from the 30 to 45 days generally seen as desirable, and that GM‘s inventory levels are below the industry average.

As TTAC readers discussed yesterday, 60 days of inventory are considered desirable in America. The few GM executives who are not in China yet would love to. Especially GM’s American pick-up inventory, hovering at double Chinese levels of 120 days, is troubling.

Some people tend to explain it with the big model change, some people say it is silly to pile up huge previous-gen inventories before a model change. Some people say it’s criminal, and filed a class action suit. That’s something else that has yet to come to China.

However, here is something else the Chinese can learn from the Americans: Say it’s all part of the big plan, and the inventory has been built up to avoid future shortages. Reuters reports today that the China Association of Automobile Manufactures (CAAM) expects passenger car sales to rise 11.1 percent this year, picking up in the second half from a slower first.