BEIJING, June 8 -- May sales of passenger vehicles declined 7.1 percent month-on-month to 1.03 million units, and the China Passenger Car Association predicted China's passenger vehicle market will continue slowing until August.
Though year-on-year sales growth was 25.7 percent, it was the second monthly sales drop after 1.26 million units were sold in March. The drop in sales of MPVs was the deepest, as 20.2 percent fewer were sold in May than the month before.
"Car producers got a lot of orders at the end of last year. And that prompted January sales to reach 1.31 million units. When a majority of these orders were filled in February, sales began to fall," Yang Zaishun, deputy secretary general of the China Passenger Car Association, said Monday. "The process of going from a blowout to a relatively rational market will last till July or August."
Cooling in the auto market depressed prices. A monthly survey done in the nation's eight major cities by I.S. Engine Consulting showed average passenger vehicle prices fell from 142,000 yuan to 140,400 yuan ($20,786 to $20,552) as dealers boosted sales through price cuts.
China's largest passenger vehicle producer, SAIC-GM-Wuling, sold 97,056 vehicles last month, compared with 106,200 units in April. The second largest, Shanghai GM, sold 83,303 units, up 48.7 percent from last May, but 5 percent lower than in April. Sales of FAW-Toyota, the 10th larg-est, plunged 21 percent in May from April.
Yang said the process wouldn't cause negative year-on-year sales growth. Boosted by favorable market signals, passenger vehicle sales in June will be no worse than in May, Yang said.
Starting June 1, the government will offer subsidies of 3,000 yuan ($439.14) to each buyer of vehicles with engines 1.6 liters and smaller.
Sales of small vehicles increased 71.2 percent year-on-year last year, 18.2 percentage points higher than the growth rate of passenger cars. The segment accounted for 52.5 percent of last year's overall vehicle sales.
Yang believes a drop in fuel prices will also boost sales. The National Development and Reform Commission cut gas and diesel prices by 230 yuan ($33.67) and 220 yuan ($32.20) per ton respectively June 1.
According to the China Automotive Technology & Research Center, China sold 1.19 million passenger vehicles and commercial vehicles in May, a 13.95 percent drop from April.
The center said the inventory cycle of automakers and dealers has climbed since February. May's inventories grew by 118,000 units from April.