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The looming dangers of auto overcapacity


06-24-2016 04:58 BJT

According to a recent survey of 37 automakers in China, many commercial vehicles are not being sold. This survey by the National Development and Reform Commission revealed that 37 automakers in China had a combined capacity of more than 31 million cars at the end of 2015.

Automakers had over 25 million units of passenger cars, almost five-and-a-half million units of commercial vehicles, and will be adding another six million units annually through its production facilities. In the field of passenger vehicles, some of China's automakers have a capacity utilization of less than 50 percent -- so about half of their vehicles are effectively sitting in a warehouse, unsold. This should be hitting 75 or even 80 percent just to break even.

In April this year, China sold more than 340,000 commercial vehicles -- that's a 5.4 percent increase year-on-year -- but lower than the overall auto growth rate of 6.3 percent. However, in the first four months of this year, 1.2 million commercial cars were sold, a mere 2.7 percent increase year-on-year. Experts are warning auto manufacturers to be cautious about their capacity.

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