More than 100 car factories have been largely idle, and there are still 10.46 million vehicles under construction

Since last year, the merger of backward production capacity by head car companies has entered an explosive period, but the crisis of China's automobile overcapacity is still severe.

According to the data released by the Federation of Passenger Vehicles, by the end of 2021, the total production capacity of passenger cars in the country will be 40.89 million units, and the capacity utilization rate will be only 52.47%, of which 36 car companies will have a capacity utilization rate of less than 20%, and the annual sales volume of less than 10,000 car companies will also reach 29. However, in the case of overall overcapacity of passenger cars, 10.46 million units of production capacity will be completed and put into operation by enterprises that have already met production qualifications.

The head of the market research department of a car company told the first financial reporter that according to the company's statistics, the number of car companies with largely idle production capacity in China is as high as more than 100, even if the output is very low or close to zero, the local authorities are not willing to implement bankruptcy liquidation. "For car companies to acquire idle factories, the local government not only does not want money, but also gives some financial support." Local governments hope to revitalize production capacity, but due to too much spare capacity in various places, some factories have been annexed, and now there are few opportunities for idle factories to be collected. Wang Yang (pseudonym), an executive of an independent car company, told the first financial reporter.

The production capacity of more than 100 car companies is idle

In the era of fuel vehicles, the number of Chinese automobile companies is about 130. With the outbreak of the new car-making movement, nearly 300 new car companies have been added, of which about 20 have already built factories. However, among the total of about 100 car companies, only 86 have sales statistics. The current development of these 86 car companies is extremely uneven, and the capacity utilization rate of the 11 enterprises in the head is higher than 100%, basically it has been opened in three shifts, and the rest days have to work appropriate overtime. Among them, 6 are wholly foreign-owned or joint ventures in China, and 5 are domestic enterprises. In addition, there are 4 new energy vehicle companies with a capacity utilization rate of more than 100%, including Tesla.

The production capacity of some Japanese cars and luxury brands is relatively tight. Dongfeng Honda, for example, has three plants with a planned annual production capacity of 768,000 units, but Dongfeng Honda will sell about 800,000 units in 2021. From the perspective of luxury brands, BMW sold 100,000 vehicles in January this year, and its Dadong factory in Shenyang is being upgraded and expanded.

Among the 86 enterprises, only 29 enterprises have a capacity utilization rate of more than 40%, and there are also 29 enterprises with a capacity utilization rate of less than 10%. These smaller and lower sales enterprises not only have serious overcapacity, but many companies are still negative growth when the industry has a growth of 6.6%. Without fundamental changes, there is little hope that such enterprises will reverse the situation of overcapacity. In addition, according to industry statistics, there are currently more than 130 idle factories in the mainland automotive industry, and overcapacity is serious.

"For car companies to acquire idle factories, the local government not only does not want money, but also gives some financial support." Local governments hope to revitalize production capacity, but due to too much spare capacity in various places, some factories have been annexed, and now there are few opportunities for idle factories to be collected. Wang Yang told reporters.

Due to the overly optimistic judgment of the car market, in the past few years, a number of car companies have expanded production wildly, and with the weak growth of the car market and the intensification of competition, the sales of these car companies have begun to decline, which has caused a lot of waste of production capacity. At present, the marginalized enterprises are mainly divided into three categories, one is the second-tier joint venture brands represented by DPCA, Changan Ford, Beijing Hyundai, GAC FCA and Renault, etc., their capacity utilization rate is low, and some products have been marginalized. Since around 2013, these brands have begun to expand their production capacity, and some companies have doubled their production capacity. But in 2018, the auto market declined for the first time, and some second-tier joint venture brands began to struggle to the death. Today, Renault passenger cars have lost to the Chinese market, and the commercial vehicle market is also in turmoil. In addition, the capacity utilization rate of these second-tier joint venture brands is low, and some factories have been sold to other brands. For example, one of Beijing Hyundai's factories sold to ideal cars, and even if the first factory was sold, Beijing Hyundai's capacity utilization rate was still less than 30%. In addition, it is reported that DPCA will also transfer the second plant to Dongfeng Honda.

Another type of enterprise is a weak foundation of independent brands, they do not have a strong automobile group behind them, while failing to keep up with the pace of market development, and finally because of the break of the capital chain to bankruptcy. Since around 2018, dealer rights protection incidents such as Zotye Automobile, BAIC Yinxiang, Lifan Automobile and Cheetah Automobile have been staged continuously, and these companies have also been regarded as non-mainstream car companies, and their survival conditions have become worse and worse. In the end, the factories of many car companies were acquired by the head enterprises, such as Geely taking over the Cheetah factory in Changsha, and Great Wall Motors was rumored to have acquired the Linyi factory of Zotye.

In addition, brilliance automobiles, FAW Xiali, AND NANC, which even rely on automobile groups, eventually went bankrupt due to multiple factors such as the system. These companies have not seized the opportunity in the golden fifteen years of the auto market to carry out joint ventures with foreign big brands. Taking Xiali as an example, Xiali has been doing technology transfer with Dafabet Automobile, but has not achieved further breakthroughs to choose a good joint venture partner. NANQI once had a joint venture with Fiat, but the added value was relatively weak. In the end, Fiat withdrew from NANC and NANC merged into SAIC.

Mei Songlin, a senior analyst in the automotive industry, believes that the failure to catch the joint venture ride, the inflexible mechanism, and the lack of internal reform in the future to drive enterprises to transform and upgrade have become the main factors in the decline of Xiali and other enterprises. In addition, in recent years, new car-making forces such as Changjiang Automobile, Bojun And Sailin Automobile have fallen one after another, and the capacity utilization rate of new energy vehicles is also relatively low. Cui Dongshu, secretary general of the Association, believes that in recent years, the automobile market has changed too quickly, and the entry-level models have shrunk significantly, which has led to the outbreak of capacity utilization problems, and many companies have withdrawn from the market.

"The automotive market is changing at a rapid pace, with product life cycles lasting no more than 24 months, typically 12 to 18 months, after which they begin to decline." Wang Yang told reporters that many car companies failed to do a good job of strategic planning, products could not meet the needs of the market and did not update in time, and finally went downhill.

Be wary of blindly getting on the horse

It is worth noting that in the case of overall overcapacity of passenger cars, there are 10.46 million units of production capacity under construction that have already been qualified for production, and most of the production capacity under construction is new energy vehicles. Although the existing capacity of traditional automobile companies can also produce new energy vehicles in a co-line manner, most enterprises choose to build new factories instead of using existing production capacity. This has led to an accelerated decline in the utilization rate of automobile capacity, and the problem of automobile overcapacity has become more prominent.

Wang Fengying, president of Great Wall Motor, believes that the dispersion and imbalance of the production capacity layout of the automobile industry will constitute the loss of resources such as capital, land and talents, hinder the coordinated development of the automobile industry chain, and affect the high-quality development of China's automobile industry. While solving the problem of overcapacity of traditional automobiles, the automotive industry must also prevent overcapacity of new energy vehicles.

Although some car companies have revitalized their resources through the acquisition of production capacity, for some companies that develop new energy vehicles, they prefer to build new factories, which is because the cost of renovation of old factories is higher, and some old factories do not meet the standards for the production of new energy vehicles. On the other hand, local governments have a positive attitude towards the landing of new energy vehicle projects.

"Local governments have played a big role in promoting." Wang Yang told reporters that the distortion of the government's incentive mechanism has also led to excessive investment. According to a report released by the National Information Center, GDP is still an important performance indicator under the existing promotion mechanism for local government officials. Automobile is one of the important economic pillars, automobile production can not only directly create GDP, stimulate local economic growth, but also make a large tax contribution, absorb more employment, but also drive the supporting production of the upstream and downstream industrial chains, with a strong spillover effect. Therefore, local governments have a strong incentive to support the development of the automobile industry in the region, by directly providing financial subsidies, or providing preferential policies such as land, bank credit, taxation, and energy, to attract automobile companies to settle in, encourage automobile investment, and boost the continuous increase of automobile production capacity, but also cause some areas to be unrealistic and blindly invested.

In addition, the government also protects local car companies, even if some car companies are on the verge of bankruptcy, the government still contributes to the rescue, because this is related to local economic growth and employment and other livelihood problems, which in turn leads to poorly managed car companies can not withdraw from the market, become zombie enterprises, backward production capacity can not be eliminated.

Wang Yang told reporters that the local government encourages enterprises to vigorously produce, but does not have the qualifications and authority to stipulate how many vehicles car companies must produce each year, but the Ministry of Industry and Information Technology has a clause on the qualifications of production enterprises. "According to the situation of production capacity, it is required to reach a certain production scale in a year (the required amount is not large), otherwise the production access qualification will be publicized, and rectification is required, if the rectification is not in place, the qualification will be canceled." Wang Yang told reporters that some government-enterprise relations are more complicated, and some automobile projects put interests in the first place when they do it, thus violating the laws of the automobile market and ultimately failing to do the automobile industry.

Not long ago, the Jiangsu Provincial Development and Reform Commission issued the "Notice on Effectively Strengthening the Supervision and Management of Investment Projects in the Automobile Industry and Risk Prevention and Control", showing that from 2016 to 2020, the province's automobile capacity utilization rate dropped from 78% to 33.03%, attenuating by nearly half, and about 20 percentage points lower than the national average. Cui Dongshu believes that compared with Shanghai and other places with a better local automobile industry foundation, the automobile industry in Jiangsu Province itself is relatively weak, and at the same time, it lacks good resources, and the financial strength of local governments is relatively lacking. "The main reason is that the local government has not pulled good projects, so there have been successive thunderstorms." Cui Dongshu told reporters.