_focus_17march_336.jpg "BYD broke ground on a 400,000 unit plant in the northwest China city of Xi'an in last December.") |
| BYD broke ground on a 400,000 unit plant in the northwest China city of Xi'an in last December. |
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China is officially the world's largest auto market. Vehicle sales in the country jumped to a record 13.6 million units in 2009, a 46 percent increase compared with previous year.
Under the background of the above-mentioned broad market, a slew of auto manufacturers are planning or set out to expand production capacity.
With an annual production capacity of 650,000 units, China's largest indigenous automaker Chery Auto sold roughly 500,000 vehicles last year. Following breaking ground on a 200,000 unit plant in the north China city of Dalian in September 2009, the company just inaugurated a new plant in the east China city of Wuhu on January 16. With a 10-billion-yuan investment, the plant will finally add up Chery's annual vehicle production capacity to 1 million units after it enters production in 2012.
Chinese battery and car maker BYD sold about 445,000 vehicles in 2009. In last December, it began to build a new plant in the northwest China city of Xi'an. The annual car output is expected to be about 400,000 sets. BYD, 10 percent owned by Warren Buffett's Berkshire Hathaway, aims to sell 800,000 vehicles this year, almost doubling its 2009 sales.
All of these ambitious capacity expansion plans are based on the premise that auto sales in China will keep roaring ahead like last year. However, as well known, last year's impressive growth came mainly as a result of government incentives.
As a matter of fact, the past experiences prove that government stimulus package can only boost market demand in the short term. After that, the market will calm towards a slower and yet more sustainable growth rate. According to China Association of Automobile Manufacturers, the average annual growth rate of China's auto market over the past 15 years has been 16 percent. There is no reason not to regard it as sustainable growth rate during the current period.
"We have to note that the constant expansion of auto-making industry will lead to overcapacity. After all, the market this year is not going to repeat last year's explosive growth as the effect of government policies is weakening," a high-ranking official of National Development and Reform Commission alarmed, "The capacity utilization rate will fall to less than 70 percent from current 80 percent."
Jia Xinguang, an independent auto analyst, is worrying about two models with surplus production capacity, involving minivans and new energy vehicles.
According to incomplete statistics, production capacity of minivans will reach 7 million units by the end of 2010, while only abound 3 million minivans are forecasted to be sold. Companies such as Chery and Changan Automobile Co. are scrambling to build multiple new minivan plants.
Minivan market demand is mainly boosted by government stimulus policy. Total sales of minivans doubled in 2009 from a year earlier. Because the government halved purchase tax on vehicles with engines of 1.6 liters and below.
"As for new energy vehicles, the market is mainly promoted by the government through financial subsidies," Jia Xinguang analyzed, "5,600 new energy vehicles were delivered last year. Only a province of Shandong plans to form a 300,000 production capacity of new energy vehicles by 2011."
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