Many Chinese automakers facing overcapacity

Shanghai, December 2 (Gasgoo.com) Many Chinese automakers are facing the problem of production overcapacity following aggressive expansions, a report from the Economic Observer showed Monday.

To quote some, Shanghai Automotive Industry Corporation (Group) (SAIC) launched its 150,000-unit-a-year Lingang facility recently, where its self-developed sedan Roewe 550, the next-generation Roewe 750, and some MG-branded car models are expected to be made.

Together with its production bases in Yizheng and Pukou, SAIC will boost its production capacity of proprietary brands to 400,000 units. However the Roewe sales for the first half of this year just stood at 8,244 vehicles and sales of MG-branded car models were only 3,661 units, both falling short of the sales projections.

Roewe 550 production line at SAIC's Lingang facility

Sichuan FAW Toyota, one of FAW Group Corp's joint venture plant with Toyota Motor Corp, added a 100,000 unit-a-year facility at the end of October. The expansion will boost the production capacity of Toyota and FAW's joint venture to 570,000 units. In contrast, the venture only sold a total of 282,600 vehicles in 2007.

Chinese automaker Haima Investment Group Co said in September it planned to build two plants to triple its annual car production capacity to 450,000 units. The two plants will be located in the central Chinese city of Zhengzhou and in the southern city of Haikou respectively. Last year the homegrown automakers sold 130,000 cars.

Industry insider says production expansion amid crisis can offer either a loss or a chance for automakers. On the one hand, expansion plans require a huge investment; once the market continues to tumble it would lead to billions of losses but, on the other hand, they may be able to grab more market shares when the market recovers. 

The table below gives a glimpse of current vehicles production capacity and sales performance of some Chinese automakers and their production targets.