Shanghai (ZXZC)- China's Vehicle Inventory Alert Index (VIA) stood at 52.9% in May 2021, dropping 1.3 percentage points from the previous year, while also falling 3.5 percentage points from the previous month, according to the China Automobile Dealers Association (CADA). The figure was still above the official warning threshold.

In May, the footfall and car deliveries were whittled down as many people took trips during the five-day May Day holiday, said the association. The car demands were somewhat weakened due to the sporadic resurgence of the COVID-19 cases in some regions, the extreme weather in South of China, and the busy harvest season in some places. Compared to April, China's car sales basically remained flat in May.

The CADA also noted the industry-wide chip shortage forced several automakers to reduce production. Some dealers revealed that the lead-time of some hotter-selling models was extended as the supply was short of demand, resulting in an unstable sales performance. In addition, dealerships faced bigger pressure in operation as OEMs tightened the incentives for sales promotion due to the rising raw material costs.

The VIAs of the imported & luxury brands, the mainstream joint-venture brands, and the Chinese indigenous brands amounted to 52.7%, 55%, and 57.7%, dropping 0.4, 3.1, and 7.2 percentage points over a month ago respectively.

The CADA said China’s auto deliveries in May were lower than the expected and the auto market will enter a traditional off-season in June. Although car dealers will struggle to fulfill sales goals set for the second quarter and the first half of the year, the price competition is likely to be weaker than that of the year-ago period due to the insufficient supply stemming from chip shortage.