Chinese Government Now Fretting about Auto Industry

[marmar]

Chinese Government Now Fretting about Auto Industry
by Wolf Richter • May 13, 2016


[font color="blue"]Commercial Vehicle Overcapacity at Catastrophic Levels.[/font]

Overcapacity weakened the US auto industry before the Financial Crisis, and destroyed it during the crisis, with two of the Big Three automakers, some of the biggest component makers, and numerous smaller component makers going bankrupt. It was during the bankruptcy process that the industry restructured, laid of hundreds of thousands of people, shuttered and shed plants, mauled creditors, destroyed stockholders, and finally got rid of overcapacity.

Overcapacity is devastating to the industry, employees, investors, and creditors. But it feels good on the way up.

And now the Chinese auto industry has that problem. The automakers active in China, including all global brands, have had no patience with doubters, and announcements of new assembly plants being built in different parts of China became a near weekly ritual.

China went from automotive backwater to the largest auto market in the world, blowing past the US in the process, within a decade. Last year, 24.6 million vehicles were sold in China, and no one was going to stop this blistering rate of growth, not even the slowing economy.

.....(snip).....

So when sales began to sag last year, the government threw all kinds of subsidies at it to keep growth alive no matter what, and sales perked up again. In the first four months this year, sales rose 6.1% compared to the same period in 2015, a far cry from the double-digit growth of prior years.

Yet automakers kept building plants, and production capacity kept soaring far faster than sales. By last year, China had the capacity to build 31.2 million vehicles. And idle capacity – the bane of the industry – is now rising; and in the case of commercial vehicles, an indicator for the good-producing economy, overcapacity is soaring. ..............(more)

http://wolfstreet.com/2016/05/13/auto-industry-industry-hype-chinese-government-warns-about-rampant-overcapacity/

[cantbeserious]

1. Capitalistic Greed Knows No Bounds

eom

[elleng]

2. Keeps happening, autos and housing/apartments/offices.

What has happened to wise planning, or has it ever existed? Irrational exuberance???

[fasttense]

3. Isn't a sign of overcapacity falling prices?

And yet overpriced cars have NOT come down in price.

[Baobab]

5. I am pretty sure people have to pay huge taxes on cars in China.

if you live in a big city, at least.

[Baobab]

4. They have the same problem we have here, automation concentrating wealth much faster than

the politicians and economists expected.

Greed..