China's auto market demand to be released gradually as chip problem eases, industry association says

With the chip problem eased and manufacturers' production capacity gradually restored, the previously suppressed market demand will gradually be released, and auto sales are expected to increase in August, the China Automobile Dealers Association (CADA) said.

July is the traditional slow season for auto sales, and coupled with chip shortages, the overall market slowed down and sales declined, the CADA said in a recent report.

The auto dealer inventory warning index was 52.3 percent in July, down 10.4 percentage points year-over-year and 3.8 percentage points from June, according to the CADA's China Auto Dealer Inventory Warning Index survey.

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The re-emergence of the Covid-19 epidemic in some areas, including Guangdong and Nanjing, flooding in Henan and typhoons in coastal areas, all had an impact on the auto market in mid-to-late July.

With the epidemic under the effective control and the chip supply shortage gradually easing, manufacturers will accelerate the production pace and dealers are expected to enter a passive inventory replenishment phase in August, CADA said.

Recently, the Ministry of Commerce of the People's Republic of China proposed that it will focus on promoting auto consumption, adjusting and optimizing auto management policies and improving the relevant management system in auto circulation, which will also help auto consumption growth in the second half of the year.

For the whole year of 2021, 80 percent of dealers are optimistic about the auto market in 2021 and expect positive year-over-year growth in sales, CADA said.