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Automotive forecaster LMC Automotive has revised down its forecast for China’s car market this year in the light of recent industry data.

The research firm said its forecast for light passenger vehicle sales in China this year has been revised down by around 400,000 units, to just under 21m units, 6.7% ahead of last year. Next year, the market is forecast to grow to just over 22.8m units.

LMC said that inventory held by dealers in China is at an unusually high level and that demand in Tier 1 and 2 cities is being hit by restrictions on car purchase which created a ‘frenzy’ of sales last year and has resulted in a high base for comparison as well as a ‘payback effect’ this year.

However, LMC also said that demand in Tier 3, 4 and 5 cities is holding up and that the overall market position should improve from the fourth quarter and into 2016.

LMC said that it expects dealerships to make tangible strides in their efforts to shift built-up stocks during Q3 and Q4 in the wake of the production volume adjustments that automakers will ‘inevitably make this summer’. In the months to come, these corrections will lead to significantly lower production levels in comparison to the level of wholesales, LMC said.

A number of vehicle manufacturers have recently voiced concern over the outlook for car demand in China due to the slowdown of the economy and additional worries over large stockmarket falls. 

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By GlobalData