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Overproduction Looms In China's Auto Industry

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Written by Gary Bowerman Saturday, 05 September 2009 17:27

Heavy price cuts on cars in late 2009 and early 2010 could be the result of an alarming level of automobile overproduction this year, some analysts have warned after the National Development and Reform Commission predicted that vehicle output in China will reach around 12 million by the end of the year.

Chinese domestic automakers were "expected to produce and sell more than eight million vehicles in the first eight months of 2009, said Chen Bin, Director of the Department of Industry under the NDRC, at the 2009 International Forum on Chinese Automotive Industry Development in Tianjin.

Sales of China's domestically-made automobiles totaled 1.09 million in July, up 63.57 per cent from a year earlier, according to the China Association of Automobile Manufacturers, and the fifth successive month of sales exceeding one million units, 

Chen added that the "growth pace of China's auto industry might be slower in the coming years" and that "there might be risks of over-capacity." 

Back in 2005, the NDRC's Chen issued the same warning, saying that "The industry is facing a grave overproduction situation." Significantly, he also added in 2005 that "China's auto production capacity is expected to be more than two times the country's demand by the end of 2010." 

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