Automakers Fret As China Clamps Down On Capacity, Seeks Consolidation

One America News Network | 4/19/2017 | Staff
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BEIJING (Reuters) – Some automakers in China are alarmed by proposed government restrictions on investing in new manufacturing capacity and the ways in which Beijing is trying to trigger consolidation of the country’s flabby auto industry through mergers and strategic cooperation.

China’s National Development and Reform Commission, seeking to address mounting excess auto manufacturing capacity, wants to restrict ways automakers can invest in new capacity to manufacture traditional gasoline-fueled cars as well as electric battery cars, according to a draft of the policy which has made public.

Developments - Factories - Automakers - Capacity - Utilization

To be allowed to invest in greenfield developments such as new factories, automakers would need to have healthy, above-industry-average capacity utilization and R&D investment, and a commitment to green cars and exports, among other conditions.

Industry players are alarmed by the prospects because they say very few automakers would be able to meet the conditions fully if the proposed policy took effect as drafted.

Factories - Government - Factories - Capacity - Executive

“It basically means, more or less, no more new factories. The government wants us to use existing idled factories to expand capacity instead,” a China-based executive with a global automaker said.

The proposed new rules come at a time when some automakers, especially Toyota Motor Co , Nissan Motor Co and Geely [GEELY.UL] are growing their market share in China and are keen to investment in new capacity.

NDRC - Capacity - Problem - Crisis - Score

NDRC wants to prevent the excess capacity problem from becoming a crisis similar to those that have previously hit a score of other industries in China – from solar panels to steel to ship building, according to the four sources.

By making it difficult for automakers to install new capacity, China’s industrial policymakers want to trigger an industry consolidation, say the sources – two industry officials and two executives from automakers.

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NDRC did not respond to a request for comment.

According to a 2017 study by PricewaterhouseCoopers (PwC), a third...
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