Nearly 3 million cars that do not comply with China’s State VI vehicle emissions standards, to take effect in July, are sitting on dealer lots across the country, according to the China Automobile Dealers Association (CADA), said Caixin.
That amounts to an estimated RMB 500 billion ($72 billion) in inventory value that dealerships must unload before the new standard takes effect and makes it illegal to sell them, according to a report the industry group released last week.
The unsold inventories of vehicles that only meet State V emissions standards are so large that as many as two-thirds of China’s dealerships believe they won’t be able to sell all of them before next month’s deadline, according to a survey published last week by China Auto Dealers Chamber of Commerce.
To make matters worse, many dealerships are locked in long-term contracts with automakers that force them to continue to buy vehicles that do not meet the updated standard.
China’s State VI standard will go into effect on July 1 in most of the country as part of the new rules to cut polluting emissions from new vehicles by about half of the current threshold. The State VI standard will be the sixth iteration of incremental emissions limits that China’s environmental protection ministry has instituted since the 1980s.