One final tone: Suppression of excess capacity cannot rely solely on the market

Chen Bin, Director of the Industry Coordination Department of the National Development and Reform Commission, pointed out at the 2010 Tianjin International Forum for China's Auto Industry Development that the rapid expansion of domestic auto companies has exacerbated the risk of overcapacity. Therefore, measures must be taken to suppress it.

Chen Bin's view of vigilance over the excess capacity of the auto industry has sparked a wave of turmoil. There are supporters and there are plenty of opponents. He Guangyuan, former Minister of Machinery Industry, believes that there is indeed a sign of structural overcapacity in China's auto industry, which requires strict approval. CCTV commentator Yang Hao stated in the “Live News Room” that the NDRC issues information that resolutely curbs the excess capacity of vehicles. It is very important that the early warning of overcapacity is better.

Dong Yang, executive vice president and secretary-general of the China Association of Automobile Manufacturers, believes that there is no need to worry about overcapacity. He said that in the past few years, the NDRC’s fear of overcapacity has lost every time. Such fears are unnecessary, and I hope that their worries will be lost this time.

Zhang Xiaojun, vice president of the China Machinery Federation, believes that the problem is not overcapacity but supply shortage. There are also some scholars engaged in economic research believe that even if the real excess production capacity, correcting excess capacity also depends on the market rather than the government.

However, I do not know whether scholars have made it clear that the subject of this round of motor repair is the local government. It is not a market activity at all, but a serious distortion of the market. For the local government to be crazy about automakers, only the central government has the ability to suppress and regulate.

At present, the basic balance between domestic car supply and demand

Seeing realistically, at present, domestic automobile production capacity can basically meet the market demand, there is no large-scale supply shortage, there is no problem of excess capacity. A small number of new models are difficult to obtain, mainly due to inadequate market estimates and the lack of supply of spare parts. Once the output comes up, it will ease. In addition, there are also some auto manufacturers that have poor sales of products, and there is a problem of production capacity being emptied. These are local phenomena. On the whole, the supply and demand of domestic cars are basically balanced.

However, we must also be aware that over-optimism of the domestic auto market in the future has led some car companies to set excessive development targets. In order to achieve this goal, some companies have invested in expanding production capacity. These capacity under construction will gradually build up production capacity in the coming years.

According to statistics, the capacity of vehicles currently under construction and planning will reach more than 30 million by 2015. According to forecasts, the demand for domestic cars in 2015 will exceed 20 million. At present, there are only a few hundred thousand automobile exports in China every year. Even if it increases to 5 million by 2015, there will still be more than 5 million vehicle production capacity.

Not optimistic about the future of the Chinese auto market

China is a country with a large population, relatively short energy and land resources. It is impossible for China to be almost like a car per capita like the United States, so that the oil supply in the world cannot be afforded, and there are not so many places in China for parking.

Experts from Tsinghua University believe that the limit of cars that can be carried on land in China is 150 million vehicles. Some people think that this goal is somewhat conservative and should be able to carry 200 million cars.

As of the end of 2009, China’s car ownership was 62 million vehicles (excluding agricultural vehicles), and it is estimated that it could reach more than 74 million by the end of this year. According to the forecast of the Ministry of Industry and Information Technology, by 2020, the number of cars in China could reach 200 million. Then more than 100 million cars will be added in the next decade.

In the past five years (including 2010), China has added 35 million new automobiles. Since China's cars are relatively young, the number of scrapped each year is not much, about 3 million vehicles. According to this trend, 3 million scrapped cars will be deducted annually in the next decade, and an average of 17 million new cars will be added every year.

Some experts believe that China's auto production and sales volume may reach the peak of annual sales of 20 million vehicles in the next two or three years, and then it will fall back to maintain the level of 16 million to 17 million vehicles per year.

The advantages of China's auto industry are mainly a large domestic market, which is produced and sold. It is very difficult to export on a large scale. This trend will continue for a long time.

About 20 million domestic sales and exports each year, and the production capacity exceeds 30 million, this is not called excess capacity called?

Suppressing the crazy construction of local government

Resolutely restraining the overcapacity of vehicles is also a frenzied deterrent to the local government.

Since last year, with the vigorous promotion of local governments, there has been a new wave of crazy "motor-building campaigns" in China. In addition to Tibet and other very few places, currently there are 27 provinces, autonomous regions and autonomous regions in the country making cars. The province with the least annual output has less than 30 vehicles a year. However, the planning of the province in the next five years will be an annual output of one million cars.

Some local governments are optimistic about the auto market. There are conditions that must be met, and there are no conditions for car projects. In order to pull up the car project, they don't hesitate to provide land for free, provide loans, and even provide various kinds of financial support. One to give is a few acres, or even a dozen square kilometers. Yang Rong, who is far away in the United States, has no money and no technology. Many places in China regard Yang Rong as a baby, and he has wooed Yang Rong to build a car, and even sent someone to Yang Rong’s home to plead. Yang Rong claimed to invest in Hefei, Anhui Province. Hefei Development Zone promised to provide 10 to 12 square kilometers of land and also provided various fiscal and tax benefits.

Auto companies are very cautious in expanding production capacity. Consider the future market demand, where the investment comes from, and what the return on investment will be. However, some local governments have blindly given enterprises indicators and tasks, led the company's development plans, forced auto companies to expand production capacity, and also issued various preferential conditions. The administrative order replaced the independent decision-making of the enterprise and it is also a distortion of the market.

Some people say that there is no need to worry about overcapacity allowing companies and markets to adjust themselves. The problem is that some enterprises' expansion of production is not a market behavior. How can the market adjust?

Over the years, the global auto production capacity has been in a serious surplus, which has directly led to the bankruptcy of GM and Chrysler.

Overcapacity is the normal state of the market economy. It is very important that overcapacity occurs because market signals fail. It is difficult for companies to accurately forecast market demand, leading to greater blindness in investment behavior. However, serious overcapacity will lead to a series of problems such as vicious competition in the market, decline in the economic efficiency of enterprises, and lack of factory operations. Not only will it hinder the sustained and healthy development of China's auto industry, it will also have a great impact on China's macroeconomic development.

To curb the excess capacity of autos led by local governments, administrative orders must be used to achieve their goals.

Firstly, the strict examination and approval of auto projects is strictly prohibited for auto projects that have no market prospect, no advanced technology and new models.

The second is to resolutely prevent local governments from providing free land and fiscal tax incentives to encourage the construction of automobiles. Once discovered, they are firmly investigated and dealt with.

The third is to strictly examine and strictly control the expansion of production capacity of automobile enterprises and the establishment of branches in different locations.

Non-market behavior can only be dealt with by non-market means. Only through the central government's strong macro-control can we avoid the risk of serious overcapacity of the automobile and ensure the sustainable and healthy development of the Chinese automobile industry.