The excess of China's auto production capacity is caused more by local protection. Because this move can not only increase GDP, but also drive employment.
The alarm for overcapacity will strike the car industry for the third time.
On December 21, 2005, at the press conference held by the Information Office of the State Council, Liu Zhi, Director of the Industrial Policy Department of the National Development and Reform Commission pointed out that the production capacity of steel, electrolytic aluminum, ferroalloy, coke, calcium carbide, automobile and copper smelting is excessive. More prominent.
On November 28, 2005, Chen Qingtai, a researcher at the Development Research Center of the State Council, who had always been outspoken, publicized the astonishing data of "China's auto capacity utilization rate is only 55%," and stated that the data came from the National Development and Reform Commission.
The data shows that: At present, the domestic auto industry has an annual capacity of 8 million vehicles, with 2.2 million vehicles under construction. This year, the market sales volume is 5.5 million, so the capacity utilization rate is only 55%. One stone provoked thousands of waves. According to sources, Chen Qingtai’s remarks represent the official position to some extent.
Sure enough, on December 3, 2005, at the national development and reform work conference and the “Eleventh Five-Year Plan†symposium, Ma Kai, director of the National Development and Reform Commission, pointed out: The overcapacity of auto vehicles is 2 million, and the new capacity is being brewed and planned. Up to 8 million vehicles.
According to industry insiders, the “Car Overcapacity†tone was set at the National Industry Development Working Conference held on November 11th, 2005 by the National Development and Reform Commission. It had only been circulated in a small area and was not announced to the public. However, as Chen Qingtai, Ma Kai and Liu Zhi have expressed their position within one month, the problem of excess vehicle capacity has begun to attract the attention of the entire industry, and more is questioned.
Three illusions of excess
"The National Development and Reform Commission's data is certainly authoritative, but most Chinese companies are very happy, so the data on the expansion of automobile production capacity should be at least 70% off." Zhu Ronghua, vice president of Chang'an Group, questioned the excess vehicle capacity.
"If you look at the parks of some auto companies, you will find that there is a lot of water between the reported capacity and the actual plant investment," Zhu Ronghua said. "The caliber reported to the officials is inconsistent, and it also exaggerates the data on overcapacity."
Zhu Ronghua further explained that some companies are claiming the name of producing automobiles and increasing local GDP. They are asking for land in large numbers and the car has become the best excuse for enclosures. In the last of these open spaces, the expected factory building did not appear, but the production capacity is expected. It has already been reported.
According to investigations, at present, domestic auto companies mostly report production capacity to the NDRC in two shifts of production schedules— 251 days and 16 hours per day. Some insiders believe that it is possible for some companies to report production capacity in three shifts.
“Automotive manufacturing is divided into four major processes: stamping, welding, painting, and assembly. The capacity of each part is inconsistent, and it is not known which part of the company's production capacity is reported.†said Gao Xu, a global managing partner at McKinsey & Co., “Actually, companies The production capacity is determined by the minimum process."
Although Chen Guangzu, a senior expert in the automotive industry, admits that there is a surplus of production capacity, he believes that a certain degree of surplus is normal, because “there may be a part of the ability to idle and phase out. That is, intangible wear and tear.â€
In fact, in 2004, when the situation was slightly better, among the more than 100 automobile companies (groups) in the country, the majority of companies had annual sales of less than 10,000 vehicles. Only five of them sell more than 500,000 vehicles a year. Among the 33 car manufacturers, the vast majority of sales are only tens of thousands of vehicles, and the few are only a few hundred.
Capacity utilization less than 60%
According to the annual sales figures released by the Automobile Industry Association in November last year, and combined with the production statistics released by major companies, with the exception of Guangzhou Honda and Beijing Hyundai, the top five companies with sales rankings were all below 60% in 2005. : FAW-Volkswagen has the lowest utilization rate of 49%.
In mid-November, Chen Bin, deputy director of the Industrial Development Department of the National Development and Reform Commission, stated at the “2006 China Industry Development Report Meeting†that at the end of the “Eleventh Five-Year Planâ€, the production capacity of the auto industry (10 million vehicles) exceeded the actual demand by more than one time. According to the annual growth rate of 10%, the automobile production capacity will reach 20 million at the end of the “Eleventh Five-Year Plan†period, and the production capacity of about 10 million vehicles will face the risk of emptying.
According to statistics, 28 provinces and autonomous regions reported automotive projects in the Eleventh Five-Year Plan, only in remote areas such as Tibet and Ningxia.
"The overcapacity in the auto industry needs to be guided rather than simply saying how to superfluous the production capacity. As for how to guide it, it is a difficult problem at present. No one can think clearly." Chen Guangzu said, "The surplus of China's auto production capacity is caused more by local protection. Because this move will not only increase GDP, but also drive employment."
The surplus has never stopped
From 2003 to 2005, domestic and foreign research institutes did not stop calling for “overcapacity of vehiclesâ€, but Chinese authorities rarely acknowledged the excess production capacity of automobiles. In 2004, international investment banks such as Morgan Sachs and Goldman Sachs expressed great concern about China's auto overcapacity, but the relevant functional departments have taken a very different attitude.
In 2004, Vice Minister of Finance Li Yong revealed at the Asian Development Bank meeting in South Korea that the Chinese government has listed several industries that have obviously over-invested, including the steel, cement, aluminum, real estate, and automotive industries. Borrowing in these industries.
However, the Development and Reform Commission has not included the car on the overheated list since then. There are two reasons for this: First, the right to approve projects for automobiles is controlled by the Central Government. That is, the approval of the automobile industry and the automobile announcements are approved by the National Development and Reform Commission, while the four industries, such as steel and cement, can be approved by local governments. Therefore, the relative control over investment in automobiles is better. Second, the automobile is a capital-intensive industry with a long investment cycle, so the problem of oversupply in the market is not significant.
One year later, in 2005, the “five major industries of cement, electrolytic aluminum, steel, electricity, and real estate†were listed on the overheating list of the Development and Reform Commission. Once the auto industry with “very loud voice†was once again excluded. However, many people in the industry have realized at this time that the situation in the auto industry is already very bad.
In the second half of 2004, China's auto industry suddenly turned cold from a high-speed growth and it broke the good dream of high growth in auto demand. In 2004, Morgan Stanley pointed out in a research report that "China's auto capacity utilization rate is only 76%."
"This is Morgan Stanley's penalties." Informed sources said. Earlier, in a small-scale exchange with industry insiders, Morgan Stanley stated that "China's auto capacity utilization rate is less than 60%."
Ernst & Young Certified Public Accountants agreed with this statement. Ernst & Young’s Global Automotive Director McGowan Hanley believes that China’s overcapacity worries have been exaggerated and that all China’s auto investment plans are not necessarily finalized, so the final production capacity will not necessarily be as big as expected.
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