Automake multicrystalline rs may be risking oversupply
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Automakers may be risking oversupplyPublished: 06 Sep 2009 17:02:01 PST
Carmakers have posted record sales over the past few months, but their rapid expansion could lead to problems as supply starts to outpace demand, according to a government official.

"As market growth slows down due to a lack of favorable policies and uncertainty about the future, we could very likely see more excessive supply in the auto industry," said Chen Bin, director of the Department of Industry under the National Development and Reform Commission (NDRC).

Speaking over the weekend at the two-day 2009 International Forum on Chinese Automotive Industry Development held in Tianjin, Chen estimated that without new government regulation and guidance, automakers could be producing more cars than they can sell within the next two years.

More than 1.1 million vehicles have been sold each month since March, and sales of low-emission, compact cars reached 3.15 million in the first half of 2009, up nearly 45 percent over the same period last year, driving carmakers to expand their operations and increase production capacity.

Dongfeng Nissan announced in July that it would spend 5 billion yuan ($732.14 million) to build a new plant able to produce up to 240,000 vehicles. Guangzhou Toyota Motor started to produce cars at its second plant in May, raising the company's capacity from 200,000 to 360,000 units.

Domestic automakers also have high expectations for the market. Chery and Geely elevated their production targets from around 400,000 this year to 2 million by 2015, while Tianjin FAW and Great Wall Motor are building new plants.

The NDRC's Chen believes that car producers need to invest more money in research and development of fuel efficient and alternative energy vehicles instead of just increasing current capacity.

But the news may not be all bad. According to the China Automotive Review,, when some companies overextend their capacity, the industry could benefit as "real market consolidation may happen through mergers and acquisitions."

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