China produced 2.138 million vehicles in April, down -17.9% month-on-month and -1.9% year-on-year, according to data from the China Association of Automobile Manufacturers (CAAM). This is the second time that monthly vehicle production in China has seen an on-year decrease since January.

Passenger vehicle output dipped -3.32% y-o-y to 1.78m units, while commercial vehicle output grew 5.86% y-o-y to 355,600 units. The monthly steel demand from automotive production saw its first y-o-y decrease since Aug 2015, falling -0.43% y-o-y to 3.4 million tonnes, Kallanish calculates.

Over January-April, automobile output was still up 5.4% y-o-y at 9.27m units. After adjusting for vehicle type the data implies finished steel demand of around 14.59mt, still up by 7.13% y-o-y.

The slowdown in growth in automotive production is partly caused by a smaller discount on car purchase tax this year, says CAAM deputy chief secretary Shi Jianhua. There were buyers at the end of 2016 that bought early to make the most of the extra 5% cut that expired on 31 December.

Reports from passenger vehicle distributors and carmakers also show that current inventory levels have increased by 11.4% from the start of the year. This build up in inventory suggests vehicle production could slow further in the coming months until stocks are cleared.