Frbiz Analyzes a Supply Shortage in China's Domestic Auto Market

BEIJING, July 29 /PRNewswire-Asia/ -- Frbiz.com, one of China's leading B2B search platforms, analyzes China's domestic auto supply shortage phenomenon.

The government policy of promoting the domestic automobile has begun a dramatic reversal since early 2009. August is a traditional off-season for sales in China's domestic auto market, but strong market demand is sill expected throughout August of 2010, and the auto market will be under-stocked. Although some car manufacturers are producing overtime, supply is still short. Consumers are facing excessively long waiting periods to purchase a car, and some customers have abandoned plans to buy or have switched to other car manufacturers that can guarantee short wait times. This has affected the industry in a reduction of profits.

From the Association of Automobile Manufacturers, statistics show that China's domestic vehicle production in July was 1,119,600 units, year-on-year up 52.15 percent; sales were 1,085,600 units, year-on-year up 63.57 percent.

Asian automobile enterprises are facing tight supply problems, and, worse, some cars are going out of stock: for example, new cars on the market this year and 1.6L models. The former is going out of stock mainly because of a shortage of manufacturers to adjust production capacity, and the latter is subject to imported parts and supply cycles. Spare parts supplies are also inadequate and capacity adjustment is not being made.

The depth of decline in the market in 2008 allowed some manufacturers to sign supply contracts that were lower than the amount of parts procured, which made some key components rely heavily on imports after an increase in sales and production. Also, affected by economic crisis, many foreign spare parts businessmen have taken to reducing production or even stopping production, which has directly impacted China's automotive market and product supply.

In addition, due to the automobile market entering the traditional off-season, many car manufacturers will conduct an annual inspection of production equipment and conduct production line maintenance, which will further affect car production in the short term.

The situation has disadvantages but also advantages. It creates a "hungry marketing" effect, which helps maintain high commodity prices and profit margins.

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SOURCE Frbiz.com