(Yicai Global) June 2 -- As the resurgence of Covid-19 cases led to a slump in visitors to physical stores and thus a decline in car sales, about 40 percent of the dealers cut jobs in May, according to the China Automobile Dealers Association.

“Average visitors to 4S stores -- car shops that provide sales, service, spare parts, and surveys -- fell 45 percent last month from a year earlier,” Wang Du, deputy secretary-general of the CADA, said at a monthly press briefing yesterday.

Each car dealer fired one to 10 employees last month, according to the findings of a monthly industrial survey the CADA released yesterday.  

Nearly one-third of the surveyed 4S stores said the number of visitors dropped over 50 percent in the period. Fewer customers caused some dealers to miss the monthly sales target, resulting in the lay-off of sales employees. 

"The CADA expected passenger car sales to have fallen over 20 percent to about 1.3 million units last month from the same period a year ago," Wang said.

“Many employees were fired this year, despite the dealer conducted several rounds of lay-offs over the past two years,” a sales director at a car dealer told Yicai Global, adding that the 4S store he works temporarily closed in mid-May due to the pandemic. To save orders, salespeople had to minimize their profits when bargaining with potential customers.

Although the auto industry as a whole did improve in May from April, as vehicle production and logistics picked up after lockdowns around many cities were lifted, a recovery in the salesroom will take time as consumer confidence needs to be restored, added the sales director.

The Survey also shows that the recent Covid-19 outbreaks in various cities have slowed down the new car delivery process, making the dealers fail to fill existing orders on time and thus unable to receive sale revenue on schedule, which causes their operating income reduced, as well as rising financial expenses and operating costs.

The vehicle inventory alert index was 56.8 percent in May, down 9.6 percentage points from April but still up 3.9 points from a year earlier, according to CADA. 

A reading above 50 indicates excessive stock. The higher the figure, the lower the market demand and the greater the inventory pressure.

To stir up the market, China’s Ministry of Finance and the State Taxation Administration halved the tax on passenger vehicles costing up to CNY300,000 (USD44,850) and with an engine capacity of under two liters, according to a joint statement by the two government agencies yesterday.

The tax breaks cover more than 90 percent of the car models and are expected to boost new car sales by millions, enabling a positive annual car sales growth, Wang said.

Editors: Tang Shihua, Futura Costaglione