ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Automobiles

China targets excess capacity to help boost weak auto market

Government grapples with underutilized plants in crowded field

China's auto industry is estimated to have annual production capacity of 60 million units, while new car sales amounted to around 28 million last year.   © Reuters

TIANJIN, China -- China's economic regulator is planning to take measures to fix its flailing automotive industry, an official said Saturday, announcing plans to increase oversight and lower capacity as it tries to pull the market out of one of the worst slumps in its history. 

The government plans to strengthen management and oversight of excess capacity in the industry, targeting producers of gasoline-powered vehicles as upstart manufacturers flood into the market.

"The (surplus) production capacity utilization rate will be made appropriate," said Lu Weisheng at the National Development and Reform Commission, at an international auto industry conference in Tianjin. "Automakers that are late to respond need to be eliminated."

In January, the government enforced regulations that prohibited the establishment of new gasoline car manufacturers. "Appropriate implementation of management regulations is necessary. We will strengthen management and supervision," said the NDRC official.

New car sales in the world's largest automobile market totaled about 28 million vehicles in 2018, but this year manufacturers are struggling to move cars off lots. For the month of July, auto sales fell by 4.3% on the year, and have undershot year-earlier figures since July 2018.

The country is estimated to have production capacity of 60 million units due to new entrants, including small and medium-sized enterprises. According to an industry summary, the factory utilization rate of the Chinese automobile industry was about 77% in the January-June period, down 3.8 points from a year earlier.

In general, an automobile factory is said to require a utilization rate of about 80% to be profitable. The Chinese government has targeted excess facilities in such sectors as steel, as it sees the bloat hindering industrial advancement.

The road to recovery for the market remains elusive amid soft stock prices, a speculative real estate market and stricter emissions standards. A recent forecast from Fitch Solutions said China's new auto sales for 2019 will shrink by 9%. With vehicle purchases slipping by 11.4% for the January-July period, a double-digit contraction for the full year could become a reality.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends January 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media