We don’t need to worry too much about excess capacity in the automotive industry

FAW-Volkswagen Automotive Co., Ltd. The second sedan plant was officially completed and put into production in the near future and will be completed in 2006. By then, the new plant will have an annual production capacity of 330,000 units, which will increase the total capacity of FAW-Volkswagen by more than double the current capacity. Only a dozen days earlier, Guangzhou Honda Motor Co., which has an annual production capacity of 240,000 vehicles, has also built a second factory. After the completion of 2006, it will reach 360,000 units. Going further, the newly established Guangzhou Toyota Motor Co., Ltd. is also well-established. It is expected that it will be put into production in the first half of 2006, and its annual production capacity will be 100,000 cars. It seems that in 2006, the Chinese auto industry will be fully committed. The "explosion year" of production capacity. By then, only the Toyota, Honda, and Nissan Japanese giants will exceed one million in annual production in China. All of these signals coincide with the views of all sectors of the Chinese automotive industry that are concerned about overcapacity. According to the forecast report of the automotive industry released by the China Information Center, China Economic Information Network, due to the rapid growth of investment in the automotive industry driven by market demand, it is expected that there will be 5% to 10% overproduction and 10% to 20% of the Chinese automobile manufacturing industry in the near future. Excess capacity. Why does the domestic joint ventures have to expand production capacity under the risk of overcapacity? What kind of consequences will this effect have on the long-term development of the Chinese auto industry? The reporter believes that there is a need to dialectize the problem of overcapacity in the domestic automotive industry. Because the overcapacity measured by relevant departments is based on the absolute production capacity of the joint venture companies compared with the demand of the automotive market, but considering the specific conditions of the production capacity of the Chinese auto industry and the development of future market demand, it does exist. The overcapacity is actually the only way for the deepening of the competition in the automotive industry. There is no need to worry too much. Analysis of the current production capacity distribution of domestic automobile manufacturing companies is characterized by small and scattered, low levels. According to data released by the relevant state agencies, of the 123 vehicle manufacturers in the country, 95 have annual production of less than 10,000 vehicles, of which 70 are under 1,000 vehicles. In the long run, absolute overcapacity will lead to full competition in the market. These scattered and small-scale production capacity will not be able to survive in the increasingly brutal price war in the future. Either eliminated or merged. Moreover, in the existing production lines of domestic manufacturers, there are a large number of products produced that are already eliminated from abroad. This huge amount of production capacity can still function normally in the short term and create “surplus value” in the Chinese market. However, in the long run, it will sooner or later be abandoned by increasingly sophisticated rational consumers. Therefore, we must not only see the explosive growth of "advanced production capacity," but also take into account the demise of "backward, scattered production capacity." With regard to the newly built FAW-Volkswagen sedan second plant, the new plant's production capacity of 330,000 vehicles can produce VW Group's fifth-generation A-class vehicle production platform and other platform product models, such as the Polaris A5, Kadi, Audi A3, etc. The new model has a much higher technological content than Volkswagen's third-generation A-Class Jetta and other products. At present, the flagship product of FAW-Volkswagen sales is Jetta, but in the long run, more and more consumers will turn their attention to higher-tech, more stylish models. For example, Jetta is a grandfather's product, Bora (A4) is a father's generation, and the new Bora (A5) is the most "young" grandchildren. Although the three generations of grandfathers and grandchildren inherited the same strain, there was a difference of tens of thousands of miles between the technical content and the fashion index. The current low level of maturity of China's auto market certainly determines that the current generation of fathers and fathers, fathers and grandchildren can "coexist peacefully," but the old and new replacement is an irresistible trend after all. Old products will inevitably end in life. The reporter once asked a staff member of Tianjin FAW. How many years is it expected that Xiali can survive in the domestic market? His answer was astonishing to reporters - 20 years! It can be foreseen that although this low-tech product has already achieved a record of more than one million units in the country, fierce market competition will never give it another 20 years of life. If so, the maturity of the Chinese auto market is too sad. (Nanchen)

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