The crisis is all over the world

This year, the demand for China's auto market is less than 6 million, and the industry's total production capacity has reached 8 million, with a surplus of 2 million. At present, there are still 2.2 million vehicles under construction. In the next five years, 8 million new capacity will be brewing and planning... At the National Development and Reform Work Conference recently held, Ma Kai, Director of the National Development and Reform Commission, has produced capacity for the automotive industry. The problem of surplus shows concern.

Ma Kai's concerns are not without reason. According to a survey conducted by the National Development and Reform Commission, at present, there are 117 automobile manufacturers across the country, but
There are more than 90 annual output of less than 10,000 vehicles, and it is impossible to achieve scale efficiency. In the first 10 months of this year, although the cumulative output of the automotive industry increased by 9.18% year-on-year to 461.89 vehicles, the profits of the entire industry decreased by 36.7% year-on-year, and the loss of loss-making enterprises increased by 86.2%. The adverse consequences of overcapacity in the automotive industry have already emerged.

To this end, the National Development and Reform Commission will strengthen the implementation of the automobile industry development policy next year, tighten market access, control new projects, and provide loans and land to companies that do not meet the conditions. At the same time, it is clearly stated that the newly-built and expanded vehicle companies must satisfy their own brands and independently develop products.

In fact, concerns about overcapacity in the automotive industry have long existed.

——— In 2000, relevant departments once worried that the sedan industry would not be able to complete the “Ninth Five-Year Plan” and 40% of production capacity would be vented.

--- In 2002, a statistic compiled by the State Economic and Trade Commission summarizing data submitted by various localities showed that by 2005, the planned national automobile production capacity will not be less than 6.22 million, exceeding the forecasted demand of the "15" market by 3.1 million to 3.3 million vehicles. Nearly doubled.

In 2003, a statistic showed that by 2008, the planned production capacity of automobiles in various places will exceed 10 million vehicles. According to the most optimistic forecast, the annual demand of China's automobile market in 2008 will be only 6 million vehicles.

Looking back at these numbers today, you may be sceptical about the development of the market. Indeed, at the end of 1999, there was still concern that the "Ninth Five-Year Plan" could not be completed. However, the "Tenth Five-Year Plan" of the auto industry was actually completed three years ahead of the end of 2002. The most optimistic forecast in 2003 is that annual sales of 6 million vehicles will be achieved in 2008, but this year, China’s auto sales are expected to reach 5.5 million vehicles.

In view of the uncertainties in the growth of the auto market, and more importantly, taking into account that the auto industry is a completely competitive industry, the key role of market demand in the regulation and supply is increasingly prominent. Previously, when it came to the issue of excess capacity, there was always the view that there was no need to worry about people. At the end of 2003, when the National Development and Reform Commission proposed the list of overcapacity industries, the car was impressively listed. However, when the state regulated the overheated industry in 2004, the car was “lucky” to “get out of the list”.

However, the negative consequences of excess capacity, automotive companies are empathetic. Since last year, the growth rate of the domestic auto market has slowed down, the price war has intensified, and the profits of the industry have fallen drastically. The sustainable development of China's auto industry is facing severe challenges. The overseas road show team of Dongfeng Motor Group Co., Ltd., which was successfully listed in Hong Kong recently, has deeply felt the overwhelming concern of overseas investors over the overcapacity and prospects of the Chinese automobile industry.

Of course, to control the overcapacity in the auto industry, we must also apply the “visible hand” of the market and the “invisible hand” of the government, in particular, give full play to the role of the market. At present, joint ventures that account for more than 70% of the sedan market have gradually woken up from the impulse to expand production and capacity planning has become more in line with market demand. Newly-entered private enterprises are relatively more cautious in expanding their production due to investment constraints. It is the blind expansion of certain state-owned enterprises for the so-called “performance project” and other new projects that mainly rely on bank loans to arouse the attention of relevant departments.

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