CHINA: Car output up 71.6% to end November as glut fears rise - report

By just-auto.com editorial team | 23 December 2003

Car output in China jumped 71.6% over the year to November to 200,200 units, prompting concerns of a glut in the world's fastest-growing major car market, the official Xinhua News Agency said, according to Reuters.

Xinhua reportedly said production in the first 11 months rose to 1.8 million cars, which puts annual output on track to double this year and break the two million car mark.

The Reuters report said overall output of vehicles - including cars, trucks and buses - rose 32.7% in November from the year-earlier period to 419,600 units.

Xinhua reportedly did not give figures but said vehicle sales have caused growth in domestic consumption to hit 42.8% in November.

Stimulated by the strong demand, investment in China's auto industry was leading to an impending glut, the news agency report said.

"With billions of dollars in additional capacity still to come on line, the country's auto industry is showing signs of overheating with blind investment emerging," Xinhua said, according to Reuters.

The news agency noted that analysts have warned of an impending margin-eroding glut, with local and foreign car makers racing to boost output, and added that many carmakers in China have slashed retail prices this year as the market grows increasingly competitive.

Foreign car makers such as Volkswagen and their Chinese partners have announced capacity increases that could lift annual production to about 2.28 million vehicles by 2007, Reuters said.

"Huge potential risk exists in the repeated plant construction and capacity expansion, which would lead to mounting bad bank loans, unemployment and bankruptcy of some firms," Xinhua said, according to Reuters.

Beijing will soon unveil policies to cool perceived over-investment, perhaps by implementing stricter requirements on the building of plants and measures to restructure smaller players, Xinhua reportedly said.

Reuters said the China Economic Times reported analysts have forecast growth of China's total vehicle output to slow down to about 20% in 2004.

In one warning indicator, vehicle inventories almost doubled to 240,000 units in the first 10 months of this year from the year-earlier period, the newspaper said, according to Reuters.