Car dealers in China's Yangtze River Delta region flagged "severe challenges" in the industry and are calling on auto manufacturers to rejig their sales strategies, Reuters reported Tuesday, citing a letter by four dealers' associations.

The joint letter, circulated on WeChat, said the dealers faced "high inventory, disorderly market competition, and increased risk of capital chain rupture," Reuters said.

Dealers also said auto manufacturers have forced them to sell new cars below cost, but stopped short of naming the automakers for fear of violating Chinese competition laws, Reuters said.

The letter called on automakers to suggest "reasonable" inventory limits and adjusted sales targets to adhere to the capacity of the regional markets, the report said.

China's biggest local automakers include Dongfeng Motor Group (HKG:0489), SAIC Motor (SHA:600104), Chongqing Changan Automobile (SHE:000625), BAIC Motor (HKG:1958), Guangzhou Automobile Group (SHA:601238, HKG:2238), Great Wall Motors (SHA:601633, HKG:2333) and FAW Group (SHE:000800).

Top new-energy vehicle manufacturers include BYD (SHE:002594, HKG:1211), Li Auto (HKG:2015), XPeng (HKG:9868) and NIO (HKG:9866, SGX:NIO).

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)