Vehicle sales still plunging

Sales of commercial vehicles grew 3.5 percent year-on-year to 291,700 units in June. Those sold in the first half totaled 1.75 million, registering a 14.4 percent slump year-on-year.

However, new-energy vehicles are gaining momentum. The CAAM statistics show that China sold 21,055 such vehicles in June, more than double the figure of a year earlier.

Sales of new-energy vehicles in the first half hit 72,711 units, a 240 percent rise from the same period last year. Of those, 64 percent were pure electric models.

Domestic brands

Meanwhile, Chinese auto brands are gaining a larger share of the market.

By the end of June, domestic brands held a 41.5 percent market share, up from 37.9 percent in the same period a year earlier.

Dong said that is mainly because of the popularity of their SUVs, saying that their market share grew by 12.9 percentage points from January to July.

He urged automakers to be alert to this situation as enthusiasm with SUVs may gradually fade, and called on them to sharpen the competitive edge of family cars whose market share is dwindling.

In the same period, brands from Germany, Japan, the United States and South Korea saw their market shares fall by 0.1 percent to 1.7 percent each.

As auto sales slow, some industry insiders are advising caution against overcapacity.

They argue the combined auto capacity in China might reach 40 million units in 2015, while sales for the year are forecast to be 25 million units.

Yet Dong does not believe there is serious overcapacity. "The capacity at the end of 2014 was around 31 million units. That is a reasonable level," Dong said in an article on the CAAM website.

However, he warned against local government proposals to build plants for automakers in a move to attract their investment, which might trigger overcapacity and bring about other negative effects on the auto industry.