China’s Passenger Vehicle Inventory Fell to 3.29 Million in July, Down 30,000 from June

• In July, China’s passenger vehicle production reached 2.211 million units, up 11% YoY but down 8% from June.
• Retail sales totaled 1.826 million units in July, rising 6.3% YoY yet falling 12.4% MoM.

According to Cui Dongshu, Secretary-General of the China Passenger Car Association (CPCA), nationwide passenger vehicle inventory stood at 3.29 million units at the end of July 2025, down 30,000 month-on-month (MoM) and 40,000 year-on-year (YoY). Inventory days declined to 47, four days shorter than the same period last year.

After facing high inventory pressure earlier this year, the industry has sustained three consecutive months of destocking.

At the beginning of the year, automakers ramped up production under policy incentives, with inventory peaking at 3.5 million units in April—the highest in nearly two years. But from May through July, manufacturers scaled back production and reduced dealer stocking, easing inventory pressure.

For comparison, inventory days in July 2023 and July 2024 were 53 and 51, respectively, placing the current level at a three-year low.

Internationally, U.S. passenger vehicle inventories typically remain within 40–50 days, a key benchmark for China’s market. With the current 47-day level, China is now within a reasonable range.

Retail performance has also influenced inventory trends. Passenger vehicle retail sales reached 1.826 million units in July, up 6.3% YoY but down 12.4% MoM. For the first seven months of 2025, cumulative retail sales totaled 12.728 million units, an increase of 10.1% YoY.

Overall, the market is continuing its pattern of “weak early, strong mid-year, stable late.” In July, high base effects and consumer wait-and-see sentiment around subsidies slowed retail demand.

On the production side, July output reached 2.211 million units, up 11% YoY but down 8% MoM. Cumulative production for January–July stood at 15.44 million units, up 13% YoY. July’s output surpassed the 2022 peak by 50,000 units, indicating a relatively stable production trajectory.

New energy vehicles (NEVs) showed more noticeable inventory shifts. For NEV-only manufacturers, inventory peaked at 880,000 units in April but fell to 800,000 in June and further to 780,000 in July, down 20,000 MoM. The decline in channel and factory inventory is providing the NEV market with some buffer capacity.

Policy remains a key factor shaping market dynamics. Before July, only 43% of automakers expressed optimism about market prospects, but the sentiment index rose to 59% by the end of the month. Looking to August, the forecasted optimism level is 55%—still cautious, yet reflecting expectations for subsidies and consumption incentives.

Looking ahead, with June through August marking the seasonal off-peak, sales are expected to gradually soften.

Automakers will need to maintain a more precise balance between production and sales to prevent inventory from building up again.