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Author: Deng Suyong, Yin Bogu
Xinhua News Agency, Nanning, November 28 — Reporter Deng Suyong and Yin Bogu report that Yang Hexiang, a researcher at the National Development and Reform Commission's Macroeconomic Research Institute, recently stated in Liuzhou that China's auto industry is currently experiencing a surge in activity, but there are concerns about an overinvestment bubble in production capacity. He warned that the country's overall vehicle manufacturing capability is set to grow significantly, far surpassing market demand.
At the 2005 Liuzhou Forum, Yang highlighted that major global automakers have heavily invested in China, leading to a period of rapid expansion in the domestic auto market. However, he pointed out that the industry is becoming overheated, with an oversupply of production capacity. Currently, 27 provinces and cities are involved in automobile production, with 21 of them actually manufacturing vehicles. There are a total of 2,443 auto companies in the country, including 115 complete vehicle factories, 551 assembly plants, 154 motorcycle manufacturers, 56 engine production facilities, and 1,567 parts suppliers, along with 168 related supporting industries.
Yang noted that China’s current vehicle production capacity stands at around 5.5 million units annually. By 2007, this is expected to rise above 15 million, creating a significant surplus compared to actual market demand. With the increasing presence of foreign and private enterprises expanding their production capabilities, excess supply in the automotive sector will become the norm, while structural shortages will only be temporary.
He also emphasized that China's auto industry is largely dependent on foreign technology and joint ventures, functioning more as an assembly hub for global car giants. The domestic market is dominated by multinational corporations, with most new cars relying on imported technology or partnerships. This has led to a situation where foreign brands control the majority of the market.
To address these challenges, Yang suggested that Chinese auto companies should focus on developing new products and upgrading their offerings in line with both market demands and government policies. Through strategic reorganization and restructuring, the industry can improve its organizational efficiency and better compete in the increasingly competitive market.
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