Car Supply to Exceed Demand Predicted in China

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Last updated at: (Beijing Time) Monday, July 08, 2002

Car Supply to Exceed Demand Predicted in China

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China's three metropolitans are competing for expanded vehicle production. Since Shanghai has invested 50 billion yuan to launch its Asian largest motor city, Beijing has got its plan to pour over 10 billion yuan into a large automobile city in Shunyi in 8 years; Guangzhou also announces its native version Detroit going to be built.

With this in view, Jia Xinguang, senior research fellow from the National Vehicle Development Centre, took it as a sign of blind expansion on car production in China.

Sources tell Shanghai by its motor city resting on Shanghai Volkswagen Automotive aims to generate 300 billion yuan of revenue by 2010 and produce over 700,000 vehicles by 2005. Beijing with its automobile city is going to have a manufacturing capacity of 600,000 to 700,000 and 150,000 cross-country cars by 2010 on the strength of its Beijing Vehicle and Beijing Jeep, which have both entered into strategic alliance with the South Korean Hyundai Motors. Guangzhou also plans to produce 800,000 cars by 2005 since it has Guangzhou Honda and Fengshen backing it up.

A 2.2 million capacity is to be developed by 2010

Sources told a current capacity of 1.5 million vehicles has been developed by state-owned enterprises. Last year saw 700,000 vehicles made and this year 800,000 expected. According to Jia, China's vehicle market has registered a 30 percent growth and its market demand will not exceed 1.5 to 1.6 million by 2005. Blind expansion will bring a growing gap between supply and demand.

Moreover, the state-owned manufacturers having not completely got listed on the market leads to a surplus of productive forces and low efficiency.

Jia added blind expansion would come to a halt if the manufacturers enter the market and operate in accordance with market quotation. To make full use of domestic vehicle makers' productive capacity, cooperative efforts between domestic and foreign manufacturers are needed.

But found there is also a view contrary to Jia's

Marketing director from the Shanghai Volkswagen considers Jia's formula as wrong. He said vehicle demand by Chinese customers are large after they have got their accommodations settled, which is expected to reach 820,000 this year. It's reasonable for the three Chinese metropolitans to pin high hopes on the car market despite the lack of equilibrium and adjustment from the government.

According to senior officials of Guangzhou Honda, the problem of surplus productivity forces is universal. World car supply 20 to 30 percent exceeds demand. He said marketing competition is inevitable to undergo the process from supply exceeding demand to the latter exceeding the former.

By PD Online Staff Yang Ruoqian

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