Research: China's car overcapacity at acceptable level

The world's largest credit insurance and management agency, Coface, released a research report on the auto industry's production capacity recently, answering floating questions over auto replacement sales, production capacity utilization, and so on.

After a 46-percent increase in auto sales in 2009, it is widely expected that the increase rate this year will lower to 10 percent. However, according to the vice manager of Risk Management Department of Coface (China), Yan Tianxun, the industry's potential is much larger than imagined.

According to Yan, the majority of the 14 million cars sold in 2009 were purchased by  first-car-buyers. In the following years, the replacement sales will definitely become a priority, while end-sales will still maintain its development.

The China Association of Automobile Manufacturers (CAAM) recently launched an investigation on the production capacity utilization of the industry, and found a relatively low percentage of 75 percent on average.

Coface (China)'s deputy managing director, Fang Erguo, said that 75 percent is just an average rate, and it signifies that the capacity utilization of some small companies may even reach low at 50 percent while companies at full capacity utilization may end up at the bottleneck.

Chinese media said that the increase of the market will keep the over-capacity at an acceptable level and the leading companies in the industry will acquire the small companies one by one.