Four major problems in automotive demand are plaguing China's auto industry

Recently, the National Information Center released the Green Paper of “2007 China and World Economic Development Report”. The Green Paper believes that in 2007 and for a long time to come, China will maintain its strong demand for automobiles, but overcapacity, rising costs, chaotic export order, and decline in overall efficiency will continue to plague this young industry.

According to the analysis of the Green Paper, the first headache for the Chinese auto industry is still excess capacity. In 2005, China’s auto industry had a surplus capacity of 2 million vehicles, and 2.2 million vehicles were under construction. The new capacity of brewing and planning was 8 million vehicles. Some local governments are enthusiastic about the automotive industry and are driving green light on the capital flowing into auto manufacturing. This makes the automobile industry suddenly crowded. It is no wonder that in 2006 the National Development and Reform Commission listed the automobile industry as an "overcapacity" list. The facts that support this assertion include the fact that almost all auto companies joined the price war in 2006, while their inventory levels continued to increase, reaching 115,000, 137,000 and 149,000 vehicles in June, July and August respectively. , an increase of 118% compared to the beginning of the year. Therefore, the Green Paper believes that if the government and the capital still ignore this situation and continue to encourage and enter the industry, the collapse of enterprises, unemployment of employees, bank bad debts and financial risks will be inevitable.

Another problem that plagues cars is the chaotic order of car exports. In 2005, there were as many as 1,025 auto export enterprises in the country, of which only two had export value of more than 100 million U.S. dollars, and only 8 cars were worth more than 30 million U.S. dollars, but only 204 cars were exported in one year. The export of automotive products is of a low grade and has a high degree of homogeneity. Mainly in commercial vehicles such as trucks, the proportion of cars is less than 20%, and models are mainly medium and low grade. When manufacturing costs rise, the low-cost advantages of China's autos will gradually be lost. In addition, the low-price strategy will also hurt the international brand image of Chinese cars because some companies cannot guarantee product quality and after-sales service after selling at low prices.

According to the Green Paper, although profit from automobile manufacturing has increased significantly since the same period of last year, it was realized in 2005 when the profit base was extremely low, and it showed unsustainable characteristics. Because the contradiction between the supply and demand of the auto industry is not alleviated but intensified in the future, the production capacity that has been bred for many years will inevitably pull the entire industry into a more profitable space. There is no sign of a substantial drop in the rise in raw materials in the future. Despite all these difficulties, the good prospects of the Chinese auto industry are still beyond doubt. The Green Paper predicts that automobile production and sales will continue to grow in 2007. The market demand is expected to exceed 8 million, an increase of 18% over 2006, and the output will exceed 9 million, an increase of over 20% over the previous year.