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As the end of the year approaches, the auto market is expected to witness intense competition. This year has already seen a highly competitive environment, with no signs of any major disruptions such as music piracy. Last year, in May, the market experienced a 20% decline compared to April, primarily due to the impact of SARS. This year, the same pattern emerged, with another 20% drop from April to May, once again influenced by similar external factors. In economic terms, this was referred to as "atypical overheating." Throughout history, governments have often intervened in the auto sector during periods of rapid growth, and since the 1980s, there have been around seven or eight instances of such macroeconomic controls.
Although these interventions have historically caused significant drops—sometimes as high as 10% to 20% year-on-year—this year has not seen such sharp declines. Jia Xinguang, a senior industry analyst, expressed optimism about the first half of the year, noting that overall growth has exceeded 20%, a rare achievement globally. While Europe, North America, and Japan are experiencing declining auto markets, China is still on track for a 20% increase. However, he cautioned that rapid growth could lead to issues like traffic congestion and infrastructure strain, so a balanced approach is necessary.
Jia also mentioned that while July and August may not see significant improvements, the market will likely maintain a smooth transition. The peak sales period, often referred to as the "gold nine silver ten," typically occurs in September and October, while the fourth quarter might bring more complex conditions. He predicted that by year-end, fierce competition—including price cuts—will become more evident.
The main challenge in the second half of the year will be to clear existing inventory. According to manufacturer data, there are currently 130,000 unsold cars, which is just 1/10 of the 1.24 million units produced in the first half of the year. Although the overall inventory level isn't severe, dealers face challenges due to limited stock, some of which are already sold out. This can create cash flow problems and hinder business operations.
Jia emphasized that the priority for dealers is to move inventory, but given the current sluggish market, they can only wait for demand to catch up. Price reductions are being considered as a way to protect consumer interests. One reason the market hasn’t met expectations is the widespread hesitation among consumers to make purchases. Many are waiting for next year’s imported cars, hoping for lower prices, while others are reluctant to buy at current rates, expecting further price drops.
This expectation of lower prices has affected sales performance in the first half of the year, with some manufacturers struggling to meet targets. As the market evolves, the focus will remain on managing inventory and navigating the shifting dynamics of consumer behavior.