Chinese Auto Market Still Sour, Dealers Discount Old Stock

Automotive retail sales in China rose slightly last month, representing the first uptick in volume over the last year, according to Bloomberg. But those gains were the result of a nationwide fire sale of backed-up inventory that dealers were tired of seeing clutter up their lots. Officially, the China Association of Automobile Manufacturers (CAAM) says the new vehicle market still kind of sucks.

For June, wholesale deliveries of new passenger vehicles fell 7.8 percent to 1.73 million units. That’s twelve straight months of negative growth.

Who is to blame? Well, China’s overall economy isn’t performing wonderfully. Consumer prices on just about everything have increased while the producer price index is nearing the point of deflation. The trade war has exacerbated the issue and, despite it being on hold for the moment, most analysts aren’t forecasting an economic comeback in Asia anytime soon.

However, the automotive market has problems of its own. Tightening emission rules have spooked consumers. At the start of this month, Chinese cities and provinces implemented an evolved emission standard (stage-5) which requires cars to have better filtering systems for particulate matter and trapping exhaust gases in order to be sold. Eager to meet — if not surpass — European auto pollution mandates, China has established a hyper-aggressive regulatory path. Unfortunately those cleaner cars have been a tough sell, as consumers/dealers don’t know if they’ll legally be allowed to put them on the secondhand market.

Certain cities, such as Shanghai, have even gone so far as to adopt new stage-6 standards a year ahead of schedule — meaning dealers cannot sell stage-5 passenger cars that would be legal elsewhere in the country. There have also be discussions of outright bans of internal combustion vehicles further down the line.

“No local government wants second-hand cars or old-generation cars flooding into their cities or provinces,” said Cui Dongshu, secretary of the China Passenger Car Association. “Local government doesn’t care about the life and death of the companies or dealerships.”

According to The Japan Times, some dealerships were chopping more than $2,000 off the price of new stage-5 cars compared to the same model meeting stage-6 standards. One Peugeot dealership in Shanghai reportedly even went so far as to offer a free 301 sedan to customers who bought a 5008 crossover.

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