The auto dealer inventory alert index fell to 52.8 percent last month, illustrating a reduction in auto dealer inventory and an increase in market demand, according the China Automobile Dealers Association.

Last month's index declined 9.9 percentage points from July and 0.5 percentage points year-on-year.

The inventory alert index reflects inventory pressure of automobile dealers. It typically is lower than 50 percent when the market is healthy. It is composed of inventory, market demand, dealership finances and surveys of dealers' purchases, sales and stocks.

Lang Xuehong, deputy secretary-general of CADA, said the market has shown signs of recovery during the past two months due to a combination of factors, including the government launching preferential measures on Chinese-branded new energy vehicles in rural areas that promote sales and carmakers launching marketing events.

Some car purchase demands were released during the back-to-school season. As the traditional "golden September and silver October", which refers to the period of best market performance each year, arrives, more new models will hit the market in the upcoming Beijing auto show, Lang added.

CADA forecasts that market demands will recover to its previous levels in September.

CADA research shows that 32 percent of dealers believe that market demand will increase in September and 54 percent believe that demand will remain at the same level as last month.

Statistics from CADA showed that the index of joint ventures declined to 54.7 percent in August and the index of Chinese brands declined to 56.3 percent.

Because of the consumption upgrade and price cuts, the index of luxury brands in August showed the best condition. It declined to 46.5 percent, below the warning line, according to CADA. Some luxury vehicle brands saw sales growth last month. FAW's premium brand Hongqi sold 21,000 cars during the month, which represents an increase of 110 percent year-on-year.

Toyota's premium arm Lexus saw sales grow 22 percent to 20,698 units. The China Association of Automobile Manufacturers forecast on Wednesday that August sales will reach 2.18 million units, increasing 11.3 percent year-on-year and 3.2 percent month-on-month.