April's sales slowdown signals further challenges

April's Chinese light vehicle results echoed previous concerns as sales of locally made models grew by as little as 2 percent from a year earlier to 1.91 million units.

Leaving aside any discrepancies that might have risen from the timing of the Chinese New Year holiday, year-on-year growth in April 2015 was the lowest it has been since 2013.

The light commercial vehicle market continued to contract during the month, with one positive exception — the year-on-year decline narrowed to 13 percent in contrast to the drop of 16 percent seen in the opening quarter of 2015.

Given that the pronounced decline in sales of light commercial vehicles first took hold in April 2014, in year-on-year terms, the foreseeable future for the sector may not be quite as bleak as it has seemed in recent months.

Unsurprisingly, sales of passenger vehicles weakened further in April; the seasonally adjusted annual rate fell to 20 million units, marking its lowest point in the last six months.

Added to this, sales of locally made models in April grew by a paltry 6 percent on a year earlier, dragging year-on-year growth, in year-to-date terms, down to 10.1 percent, pushing the market perilously close to the threshold of the all-important double-digit growth level.

As wholesales slowed during the month, the pressure from elevated dealer-level inventories eased somewhat, with China Automobile Dealers Association's dealer-level inventory index falling to 1.67 months at the end of April from the 1.77 months seen a month earlier.

More significantly, when compared to the same period in 2014, the gap in the index in April narrowed to 0.15 months, versus 0.39 months in March and 0.53 months at the end of last year.

Having said that, current inventories are still well above the danger level of 1.5 months, suggesting that the pressure to destock will not disappear in the coming months.

As growth diminishes and competition mounts, carmakers are being forced to take decisive action in an effort to meet the annual sales targets they set at the beginning of the year.

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