Poor sales forces car makers to pile up inventory in China

Car companies across the board have been lowering prices in an attempt just to break even as inventory levels continue to rise.
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The growth of China's car market has been grinding to a halt, leading to inventory surpluses and widespread price slashing to keep scraping by. Manufacturers at home and abroad have started to worry about sales for the rest of the year.

Car inventory was still on the way up in June, forcing ten car makers such as Chinese Haima, Geely and Japan's luxury car brand Infiniti to announce an inventory rate over 2.5 the standard amount, according to China Automobile Dealers Association. The rate of Infiniti has fortunately dropped to 3.24 this month from 6.18 of last month while Haima reported 6.71 for this month, said Beijing Morning Post.

International standards stipulate that a healthy reserve rate should range from 0.8 to 1.2.

Chinese domestic car brands have taken the hardest hit, accounting for half of the top ten car makers with a rate over 2.5. The real rate could be even higher than what manufacturers announced.

China's total sales of new vehicles came to 1.38 million cars in July, down 12.6% compared to that of last month; the total sales of new vehicles were at 10.98 million cars in the first seven months, up 3.6% year-on-year, according to the China Association of Automobile Manufacturers.

Joint ventures, such as Dongfeng Nissan, have been gradually slipping as well. Dongfeng Nissan's sales in July came to 98,100 cars, down 2% from a year earlier. This is the first time since the conception of the venture that they have posted in the red.

The slowing growth of car sales was principally affected by the temporary development hiatus in cities at or below the third tier, reported Chinese media. Meanwhile, the slowing economy and record gasoline prices in the country further battered the car market.

Private institutions revealed that a Taiwanese car brand was forced to cut prices, having reported a deficit on its financial report for the first half of the year.

However, China's Orient Securities Company said that July and August are historically the off season for car sales and the pressure on car inventories would be eased by the end of August.