SHANGHAI--General Motors Co. will become the latest foreign car
maker to change how it reports sales figures in China, a move that
nods to broader shifts in the world's largest auto market as it
slows.
GM will report its May sales next month based on cars sold to
Chinese consumers and not to dealers, as was the case in the past.
Japan's Honda Motor Co. has been doing so since April, while Nissan
Motor Co. introduced retail sales data for its passenger-car sales
from January.
The moves come as China's auto sales cool amid a slowing economy
and other factors. On Monday, a semiofficial car manufacturers
association said China's new passenger-car sales rose 3.7% from a
year earlier in April, the slowest pace in more than two years.
The slowdown has led to a glut of vehicles on car lots and
increased tensions between auto makers and dealers, who say car
makers are setting sales targets too high.
"Car makers are finally facing up to the real market situation
in China, " said John Zeng, a director at consulting firm LMC
Automotive, who said the move is significant. "They have to learn
to see the market in terms of actual number of cars sold by dealers
to customers."
Paul Gao, head of consulting firm McKinsey & Co.'s
automotive team in Asia, said the change also reflects a power
shift between car makers and dealers. In recent years, when growth
in demand for cars was regularly in high double-digit percentages,
car makers could decide who sold what and pushed inventory to
dealers. Dealers were happy to oblige to get preferential
allocation of popular models, said Mr. Gao.
But inventory levels ballooned when demand for cars began to
slow in the second half of last year, burdening many dealers'
bottom lines.
Chinese passenger-car sales growth is expected to slow to 8%
this year to 21.3 million vehicles, compared with 9.9% last year,
according to an official estimate. According to the latest data
from the China Automobile Dealers Association, inventory levels at
the end of March this year stood at 1.77 months, 28% higher than
the year-earlier month.
In China, analysts regard 1.5 months' worth of sales on lots as
the "alert level." Yao Jie, a vice chairman for China Association
of Automobile Manufacturers, said he hopes all the auto
manufacturers will follow suit in reporting retail sales figures,
saying it would bring auto makers "closer to the market."
A spokeswoman for GM in China said the company switched to
reporting retail sales primarily because that is the method GM uses
globally and because it tracks sales to individual vehicle
buyers.
The shift could also make car companies' performances in China
more palatable, a least temporarily, to investors used to the
higher growth rates of the past.
GM's China chief, Matt Tsien, said at the Shanghai auto show
last month that GM's growth in wholesale sales in the first quarter
was around 2.5% compared with the year-earlier period. This, he
said, was below the industry average. By contrast, GM's retail
sales clocked 9% in the quarter, which he described as "quite
strong."
Zhu Linjie, a spokesman for Honda, said the sales reporting
change is intended to better reflect consumer demand. Nissan said
retail-based data will more accurately reflect frontline sales.
Some auto makers, including luxury car makers Audi AG and BMW
AG, said they already report retail sales. But analysts said
different definitions can blur the true picture, and the best way
to judge the accuracy of car makers' sales data is to examine how
reported sales relate to car registrations.
Analysis of registration data by investment research firm JL
Warren Capital shows significant differences between sales figures
reported by BMW and the number of cars finally registered.
Other analysts concur, with one analyst saying the gap for BMW
last year was around 7%. For Audi, that figure was 10%, the
analyst's data show.
A spokesman for BMW in China said many factors could cause the
gap between retail and registration data, but he didn't cite
examples. A spokesman for Audi in China said it was company policy
not to comment on third-party data.
Dealers began to push back against car makers last year. Among
the most vocal opposition has come from BMW dealers, who launched a
very public campaign that called on the Munich-based auto maker to
revise its sales targets and offer greater financial support to
dealers. In the past, BMW has said it is in constant dialogue with
its dealers.
A sales reporting system more reflective of market reality is
expected to benefit dealers. A greater focus on consumer sales
could see car companies work more closely with dealers to provide
incentive to car buyers. Already, car makers are increasingly
trying to woo consumers by offering discounts and incentives to
customers.
Analysts say vehicle-registration data is the most reliable
indication of retail sales. In China, however, that data are
controlled by public security authorities, who don't make them
public.
By contrast, in the U.S., this information is readily available.
National auto sales are also tallied by registrations in Japan.
Even if more car makers adopt the retail sales model, which
analysts say is likely to happen now that a heavyweight such as GM
has begun doing so, there will be still scope for fudging
numbers.
That is because dealers frequently "pre-report" nonexistent
sales to meet targets and qualify for incentive programs, said
McKinsey's Mr. Gao.
Still, the move could help auto makers and dealers in China
identify problems earlier. Karl Brauer, senior analyst at
automotive information provider Kelley Blue Book, said overstocking
dealers can mask overcapacity, as was the case in the years leading
up to the last recession in the U.S.
Rose Yu and Lilian Lin contributed to this article.
Write to Colum Murphy at colum.murphy@wsj.com
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