Shanghai (ZXZC)- China's vehicle inventory alert index (VIA), which reflects the inventory pressure on automobile dealers, dropped 5 percentage points month on month in May 2023, according to the China Automobile Dealers Association (CADA).

The VIA stood at 55.4% last month, dipping 1.4 percentage points from the previous year.

The index in May 2023 was still above the official warning threshold (50%).

With the introduction of the policy designed for the grace period prior to the implementation of China VI b emission standards, the overall retail prices of automobiles have stabilized, easing consumers’ wait-and-see sentiment, said the CADA. 

In May, marketing activities were launched across various regions, with some provinces and cities continuing to issue consumer vouchers or implement car purchase incentives. Manufacturers have also introduced time-limited discounts on car purchases. As a result, dealerships have seen an increase in foot traffic and orders, indicating a moderate recovery in overall market demand.

However, market enthusiasm cooled down in the latter half of May, the association added. Based on comprehensive estimates, China’s retail sales of locally-made passenger vehicles in May are expected to be around 1.75 million units, showing a slight month-on-month increase.

This month, the implementation of the grace-period policy for the China VI b non-RDE (Real Driving Emissions) vehicle sales will effectively alleviate the pressure on dealerships to clear their inventories. This policy will contribute to stabilizing automobile prices at the retail level and reducing the operational burden on dealerships, the CADA commented.

In May 2023, the VIAs of imported & luxury brands stood at 55.5%, growing 2 percentage points over a month ago, respectively. Nonetheless, the mainstream joint-venture brands’ and Chinese locally-owned brands’ monthly index reached 53.9% and 59.6%, sliding 9.5 and 7 percentage points from the previous month, respectively.