China's Auto Industry Faces Overcapacity Concerns Despite Expansion Plans

Strategic Insights -

China's auto industry has exhibited signs of overcapacity, with automakers planning further expansion despite the issue. Large Chinese auto companies have announced ambitious sales goals, while international auto enterprises are accelerating investment in the country. The overcapacity problem is mainly attributed to the drive for production expansion, including the production of traditional vehicles and new-energy vehicles.

Key Takeaways:

  • China's auto production capacity is predicted to exceed 16 million units by 2012, with automakers planning further expansion despite signs of overcapacity.
  • Large Chinese auto companies, including Shanghai Automotive Industry Corp., First Automobile Works, Dongfeng Motor Corp., and Chongqing ChangAn Automobile Co., have announced sales goals ranging from 1-3 million units by 2010-2011.
  • Chery Automobile Co. has set an output and sales goal of one million units by 2012, while Beijing Automobile Works is aiming at output and sales of 1.5 million units in 2010 and two million in 2011.
  • Great Wall Motor has increased the designed annual production of its Tianjin project from 50,000 to 500,000 vehicles and related auto parts, with a total investment of 8.47 billion yuan (US$1.2 billion).
  • ChangAn Auto has announced two expansion plans, with its Chongqing plant expected to produce 300,000 vehicles and one million engines upon completion, and a new traditional minivan plant in Hebei province with annual capacity to hit 500,000 units.
  • The Chinese government has emphasized the importance of new-energy vehicle development, inducing companies to join the production lineup, but warning against duplicated construction and overcapacity.
  • BYD Auto has called for tax preferences and subsidies for new-energy car purchases and plans to increase production by 800,000 units within two years.

Statistics:

  • Automakers' designed capacity has far exceeded the target of annually producing 500,000 electric vehicles and hybrid vehicles in 2009-2011, with new energy vehicle sales holding five per cent of total passenger vehicle sales.
  • China's auto production capacity is predicted to exceed 16 million units by 2012.
  • Chery Automobile Co. has set an output and sales goal of one million units by 2012.
  • Beijing Automobile Works is aiming at output and sales of 1.5 million units in 2010 and two million in 2011.
  • Great Wall Motor's increased production capacity is 450,000 vehicles and related auto parts.
  • ChangAn Auto's new traditional minivan plant in Hebei province will have an annual capacity to hit 500,000 units upon completion.

Sources:

  • Asia Pulse
  • Shanghai Automotive Industry Corp.
  • First Automobile Works
  • Dongfeng Motor Corp. (SEHK:0489)
  • Chongqing ChangAn Automobile Co. (SSZ:200625)
  • Chery Automobile Co.
  • Beijing Automobile Works
  • Great Wall Motor (SEHK:2333)
  • BYD Auto
  • CIE Automotive Group
  • Goodyear Tire & Rubber
  • Daimler AG
  • Fujian Daimler Automotive Co. (joint venture with Fujian Motor Group)