Business / Industries

Forum: No overcapacity in auto industry

By Du Juan in Boao, Hainan province (China Daily) Updated: 2014-04-10 07:21

Xu Heyi (center), chairman of Beijing Automotive Group, and Zhu Fushou (right), general manager of Dongfeng Motor Corp, discuss the industry on April 8 at the annual Boao Forum for Asia. Wu Jun / for China Daily

Industry leaders point to growth and urbanization

Despite reports to the contrary, China's auto industry is not facing overcapacity as sales soar and Chinese companies continue on a steady path of internationalization, said industry insiders on Tuesday.

China's urbanization process will create huge demand in the housing and auto sectors, which will lead to higher growth in the number of vehicles on the road in the coming years, said Xu Heyi, chairman of Beijing Automotive Group Co, during 2014 Boao Forum for Asia.

"The urbanization rate in China is under 50 percent, which is low compared with developed countries," he said. "So there is not an overcapacity issue in China's automobile industry."

Cars are owned by just 7 out of 100 people in the country, still far behind the global average, said Xu.

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In 2013, China produced 22.11 million vehicles, according to data from the China Association of Automobile Manufacturers.

Vehicle sales in the last year grew 13.9 percent to just under 22 million, following slowing year-on-year growth of below 5 percent in the previous two years, according to the association.

"China's automobile output and sales will reach 30 million to 35 million annually at a peak in the future," said Xu.

"China's auto industry has not been fully involved in the international market yet. From that perspective, it is just at the beginning stage and it is far from time to discuss overcapacity in the industry."

The association also predicts vehicle sales will grow 8 to 10 percent this year.

Zhu Fushou, general manager of Dongfeng Motor Corp, China's second-largest vehicle producer, agreed with Xu's comments, saying the current capacity utilization rate of 84 percent in China's auto industry is acceptable.

"Any rate between 80 percent to 100 percent is reasonable for the industry," he said. "It will be the warning time when China's auto manufacturing capacity reaches 40 million in 2020, which will drag the capacity utilization rate down to below 70 percent."

In fact, overcapacity is a characteristic of a mature market, said Zhu.

"In recent years, the development pace of China's auto industry has surpassed the expectations of the public. It has also caused some social issues such as its impact on the environment, energy supplies and air pollution, which leads to exaggeration of the overcapacity problem in the industry," he said.