Automakers in China shipped 18.7 percent more passenger cars to dealers in August from a year ago, official data showed, lagging a nearly 60 percent annual jump in retail car sales, reflecting an apparent drawdown in dealers' showroom inventories.width=398

A total of 1.02 million sedans, sport utility vehicles and multi-purpose vehicles were shipped to dealers in August, compared with 858,300 units a year earlier, the China Association of Automobile Manufacturers (CAAM) said on Thursday.

That marks an improvement from July when wholesale car sales in the country rose by a mere 13.6 percent, their slowest gain in 15 months.

There was a rebound in August, but a 60 percent year-on-year jump released by CATRC seems a bit too high, said Marvin Zhu, a Shanghai-based senior analyst with J.D. Power.

Zhu was referring to government-affiliated China Automotive Technology & Research Center (CATRC), which started releasing monthly auto sales data in April.

The discrepancy reflects an upturn in market demand in the world's largest auto market after Beijing's subsidies for fuel-saving cars took effect in late July, analysts say.

It also showed that automakers had slowed shipment of their stock to dealers, which have seen their inventory levels piling up since May, when the market started to lose some of its steam.

Automakers and dealers are partners -- they help out each other in good times and bad, said Meng Yi, a Shanghai-based salesman for General Motors' GM.UL Chevrolet brand.

Sometimes, dealers would take more than they could actually sell to help automakers achieve their sales target. In return, they would get the shipment earlier than others when the market is extremely good and people had to wait for weeks or months to get their cars, he added.

Dong Yang, secretary general of CAAM, said the numbers also reflected the fact that automakers are under less pressure to ship stocks to dealers due to partial production halts during the summer.

Inventory of passenger cars in the country came to 332,600 units as of end-August, down 43,400 units from the beginning of the month, according to CAAM.


Some industry observers, including Zhang Jianwei, vice president of CATRC, are bullish on the outlook for the rest of the year.

September and October will also be good as they have always been the best months for auto sales. Also, people may rush to the showrooms before year-end, fearing that the government may scale back incentive policies next year, Zhang told Reuters.

Automakers, however, remain cautious.

Jeffrey Shen, president and chief executive of Ford Motor's (F.N) China car venture, expects the car market to grow 15-25 percent for 2010, while Gregoire Olivier, Asia chief of PSA Peugeot Citroen (PEUP.PA) put the likely growth rate at 15 percent.

SAIC Motor (600104.SS) chairman Hu Maoyuan also expected the market to return to a more typical growth pattern within the year.

And they have reasons to stay cautious, given a 19 percent fall in Warren Buffett-backed BYD's (1211.HK) August car sales.

Sluggish sales in the past few months and rising inventory levels have forced several BYD dealers in Beijing and other areas to pull out of its sales network, local media have said.

BYD chairman Wang Chuangu dismissed the reports as exaggerated but the car maker slashed its 2010 target by 25 percent in August.

There is no market that can continue to have 40, 50 percent growth, said Shen.

(Editing by Muralikumar Anantharaman)