Vehicle industry over capacity is a talking point in China, according to Access Asia.
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It noted that a recent conference in Shanghai discussing China’s supply chain was told that overproduction was “the deadliest sin”.
But the audience of mainly Chinese manufacturers nodding in agreement had heard it all before.
The previous week, Access Asia noted, Chen Qingtai, an economist with the State Council Research and Development Centre in Beijing, also made much the same point.
He reportedly has concluded that China is an immature and increasingly risky market that lacks a comprehensive transport and energy policy and pointed out that, despite the unremitting hype of the car companies, overcapacity in China’s passenger car industry will soon exceed 50% as manufacturers continue to build new factories.
Access Asia said the situation isn’t helped by the fact that many of China’s 100 or so domestic carmakers are kept afloat by subsidies and cheap loans from local governments too afraid to let them fail.
China’s car industry’s utilisation rate in the first nine months of 2005 was 55%, and manufacturers are still adding new capacity –capacity now is eight million units, with a further 2.2 million being built and plans for another 10 million!
“Meanwhile demand appears to have stabilised with growth of about 10% a year,” Access Asia said. “A deadly sin it would appear is being committed.”
