3.4 Million New Cars in China: The Dilemma of Figuring out What to Do

Car manufacturers in China faced a serious problem. After the government supported them during the difficult period for the automotive sector, they produced a larger number of vehicles than planned.

At the same time, however, customer demand has declined by as much as 37% over the past 6 months. The decline in sales is mainly due to the fact that the authorities stopped government subsidies and tax incentives for the purchase of a new car. Thus, dealers’ warehouses were overflowing with manufactured cars, and this turned out to be a serious problem.

The situation is further complicated by the fact that in July China stopped registering new cars that did not meet the national environmental standard 6B. This is the local analogue of the European Euro-7, as some of the cars already produced do not comply with it.

According to reports, dealers of most automakers have enough inventory to last two months without new deliveries. However, as a result, there was a severe price confrontation between the different companies and price dumping became commonplace.

The warehouse volumes of the dealers currently reach 3.4 million cars, some of which are stored under the open sky. And a deterioration in weather conditions will certainly cause damage to cars and, accordingly, to their manufacturers.