(Yicai) March 5 -- Inventories at car dealerships in China declined in February, mainly because of dealers' efforts to clear inventories before the Chinese New Year holiday and vehicle procurement pace adjustments.

The China Automobile Dealers Association's Vehicle Inventory Alert Index for dealers came in at 56.9 percent last month, down from 64.1 percent a year earlier and 62.3 in January, according to data released on March 3. However, the index remains above the boom-bust threshold of 50.

"The decrease in the VIA Index for dealers in February indicates that car sales picked up after the Chinese New Year holiday," Fan Yu, deputy secretary-general of the CADA, told Yicai. Auto sales also recovered because trade-in and scrapping policies were implemented earlier this year than in previous years, he added.

Carmakers' price cuts and promotions were another main reason for the recovery of the market in February. On the first day after the Chinese New Year holiday, US electric vehicle giant Tesla launched its largest-ever discount package for the Model 3 series in China, prompting dozens of peers to follow suit and lower prices.

However, Fan believes that price cuts and promotions, together with the fact that many new car models are expected to launch this month, actually reduced demand last month because some buyers adopted a wait-and-see attitude.

"This made dealers' overall sales revenue in February still fall short of their vehicle purchase expenditures, remaining in a situation of tight cash flow and high operational risks," Fan explained.

Carmakers will unveil end-of-quarter promotions this month, Fan predicted. Therefore, dealerships will need to increase their efforts to clear inventories of old models, especially in light of new car models hitting the market.

Yang Hong, director of the Industrial Coordination and Development Working Committee of the CADA, expects March to be a peak month for new car purchases.

Editors: Tang Shihua, Futura Costaglione