Dah Chong Hong Holdings, the distributor of Bentley and Isuzu vehicles across the mainland, says carmakers have turned cautious on slowing sales growth in China and are already making adjustments to avoid over-supplying the world's biggest car market.
'All the manufacturers are getting cautious about their production [levels] in order to work with their dealers,' DCH chairman Clement Hui said. 'They are also worried that the existing overstock will create price cuts.'
Dealers are increasing discounts in an attempt to clear inventory backlogs, which rose to 58 days' worth of stock last month from 43 days at the beginning of the year.
Manufacturers shipped 946,200 passenger cars to mainland dealers such as DCH last month, a 13.64 per cent increase from July last year but 9.27 per cent fewer units than in June. It was the fourth consecutive month of declines in shipments of passenger cars and signalled a sharp slowdown from the 77 per cent sales growth in the first quarter.
'There was an adjustment in the second quarter but for the whole year the China market should see sales of 16 million cars,' Hui said.
'This isn't the first time the market has been through this kind of adjustment ... I don't think there will be any difficulties for us to solve these problems and I still have full confidence about vehicle sales in China,' he said.
Driven by strong car sales growth on the mainland and the addition of new dealerships, DCH's first-half profit rose 77.8 per cent from a year earlier to HK$480 million.