Dealership inventories across China dropped to an average 31-day supply in December from 42 days in November, reflecting a rebound in demand and a cut in the government's sales tax.

 

In December, inventories of domestic Chinese brands dropped to 37 days, down from 56 days in November, according to the China Automobile Dealers Association.

 

Stockpiles of foreign-brand vehicles built in China fell to a 26-day supply, down from 35 days a month earlier. And inventories of imported vehicles declined to 46 days, down from 57 days in November.

 

No brand reported an inventory backlog of more than two months in December, the association said.

 

Inventories declined despite the industry's tradition of boosting end-of-year production. In China, automakers routinely build inventories at the end of the year to prepare for a spike in demand during the annual Spring Festival, LMC Automotive said in its monthly market analysis published on Jan. 6.

 

The LMC report attributed strong sales to the government's decision to halve its purchase tax on small vehicles starting Oct. 1. "Looking further ahead, sales of vehicles equipped with such engines will continue to perform well in the coming months, until the policy expires," the LMC report noted.