China reduces overcapacities to support weak automotive market

12. November 2019

The Chinese economic regulator is planning measures to support the weakening automotive industry. A spokesman of the agency said the concrete steps are a strict control of the industry and a reduction of capacity to help the market out of one of the strongest crises yet. The government will focus more on the management of companies and the influence on overcapacities. In particular, the numerous new manufacturers of vehicles with internal combustion engines whose models are flooding the market will have to face restrictions.

“Overproduction must be brought back to an appropriate level,” says Lu Weisheng of the National Development and Reform Commission. “Car manufacturers that react late or with restraint to these new rules will be closed. Already in January of this year, the government enforced the regulation not to register any further manufacturers of vehicles with combustion engines.

Sales of new vehicles in China, the world’s largest automobile market, amounted to around 28 million vehicles in 2018, but this year manufacturers are having problems selling their cars to customers. In July, sales fell by 4.3 percent, undercutting the previous year’s figures. Capacity utilization in the Chinese automotive industry from January to July was 77 percent, down 3.8 percent from 2018. Normally, 80 percent capacity is expected to be used to run a plant economically.

The automotive market is under pressure from other factors such as falling stock prices, speculation on the real estate market and the introduction of stricter emission standards. This could be an opportunity for your company to export environmentally friendly and innovative products to China.

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