Spluttering Car Sales Put Pressure on Dealers as China’s Inventory Alert Index Soars

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New cars in an auto factory in Chongqing on March 24, 2024

China’s car market is under significant strain as domestic demand continues to weaken. The China Automobile Dealers Association reported Sunday that the dealers’ inventory alert index reached 62.3% in June.

The inventory alert index is above the 50% boom-bust threshold, indicating higher inventory pressure and market risk. Since January 2024, the index has remained above this threshold, signaling persistent recessionary conditions.

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China's car market faces weakening domestic demand, with a 62.3% inventory alert index in June.
Government subsidies failed to boost sales significantly; only fewer than one in five customers inquired about them.
Financially strained, only 37.6% of auto dealers were profitable in 2023, leading to conflicts with manufacturers like Porsche and BMW over sales targets and compensation.

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Who’s Who

Porsche: Porsche faced significant challenges in China, with a 15% drop in deliveries in 2023 and a further 23.5% decline in the first quarter of 2024. Dealers asked for compensation for selling EVs at a loss and objected to sales targets. Porsche promised to collaborate with its Chinese dealers on market changes and local needs. The company is pressured by a sluggish high-end market, uncompetitive models, and rapid dealer network expansion.

BMW: BMW is experiencing sales challenges in China, with first-quarter sales in 2024 dropping 3.8% year-on-year to 187,500 vehicles. To support its dealers amidst these challenges, BMW has proposed various subsidies, including a 3% price discount.

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What Happened When

2023：: Porsche's deliveries in the China market fell 15%.

January 2024：: Since January 2024, the inventory alert index has remained above the 50% boom-bust threshold.

First quarter of 2024：: Porsche’s sales in China fell 23.5% year-on-year to 16,340 units.

First quarter of 2024：: BMW’s sales in China fell 3.8% year-on-year to 187,500 vehicles.

End of April 2024：: The government introduced subsidies to help motorists replace old cars with new ones.

May 2024：: A conflict arose when Porsche dealers in China asked for compensation for selling EVs at a loss and objected to this year’s sales targets.

June 2024：: The dealers’ inventory alert index reached 62.3%, an 8.3-percentage-point increase year-on-year and a 4.1-percentage-point increase month-on-month.