Glimmer of hope from second-hand market as gentle growth registered

Auto experts said that the traditional "golden September and silver October", which refers to the period of best market performance each year, is fading as sales didn't meet expectations.

The latest statistics of the China Automobile Dealers Association show that the vehicle inventory alert index reached 58.6 percent in September.

It means that car inventories have hovered above the alert level for 21 months in a row.

The index should be lower than 50 percent when the market is healthy.

It is composed of inventory, market demand, dealerships' finances and surveys of dealers' purchases, sales and stocks.

According to statistics released on Saturday by the China Passenger Car Association, 1.78 million passenger cars were sold last month.

This represents a year-on-year decline of 6.5 percent. Sales during the first nine months decreased 8.6 percent compared with same period last year.

Dealers said that the auto market didn't meet their expectations last month. A combination of factors was blamed.

Some customers looked forward to discounts in the National Day holiday and adopted a wait-and-see attitude in September. It's also busy farming season in northern regions where the locals don't have time to buy a car, CADA said.

The index is 5.8 percentage points lower than August. The association said that some customers planned holidays for the Mid-Autumn Festival and National Day holiday and this may have affected the demand for car purchases.

Car dealers are under greater pressure because they had to increase car inventories to fulfill their seasonal obligation in the last month of the third quarter. Meanwhile, vehicle prices decreased which meant lower profits.

CADA said that dealers have accumulated much stock over this year and some carmakers will increase that volume to meet their annual goal in the last quarter.

CADA forecast that the auto market will decline further. The association suggested that dealers should estimate the market demands rationally and control their inventory.

Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight, said: "The main reason of the fading 'golden September and silver October' is that the macroeconomy led to a lack of confidence in vehicle consumption."

According to the State Information Center, private companies' employees accounted for 69.2 percent of new car buyers this year. They are the most affected by the macroeconomy.

The bad influence has spread to first-tier cities, such as Beijing, Shanghai and Guangzhou in Guangdong province, Zhang said.

Since June, Guangzhou city relaxed restrictions on buying vehicles amid efforts to stimulate sales.

These include allowing the city 5,000 more license plates every month until December 2020. Zhang said that surprisingly, people have not shown too much enthusiasm for those newly added license plates, with many of them not applied for so far.

John Zeng, managing director of LMC Automotive Shanghai, said that the final quarter usually has the best performance, but it is hard to predict this year. "China stimulated the sales of small-displacement cars in fourth - fifth - and sixth-tier cities from 2015-17 in the way of reducing the purchasing tax, which resulted in the sales decline of 2018 and this year," Zeng said.

Also, the China-US trade friction affects consumer confidence in second-tier cities, such as Suzhou in Jiangsu province and Dongguan in Guangdong province. Sales growth there has turned to negative, Zeng added.

Despite the continuing gloom in the new car market, second-hand vehicles maintained slow growth in August, reaching 1.2 million units.

In the first eight months, the sales of used vehicles reached 9.27 million units, with a year-on-year growth of 3.9 percent.

The trade volume totaled 588 billion yuan ($83 billion), increasing 5.42 percent compared with the same period last year.

Last month, Xiao Zhengsan, secretary-general of CADA, said that through a series of policies the used car market is expected to surpass 15 million units this year.