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During the NPC and CPPCC this year, Wang Fengying, deputy of the National People's Congress and president of Great Wall Motor, put forward the proposal of "Suggestions on Promoting the Capacity Utilization Rate of China's Automobile Industry." Wang Fengying suggested that the automobile industry should be promoted to gather in areas with full capacity utilization and perfect supporting system, and cultivate several advanced manufacturing clusters in the world; encourage qualified advantageous enterprises to merge and reorganize enterprises with low capacity utilization rate or special publicity; strictly control new vehicle production capacity, curb blind investment phenomenon, avoid inefficient repeated construction, and establish exit mechanism;

Data show that in 2021, Chinese automobile manufacturers sold 21.456 million passenger cars, up 6.6% year-on-year, ending three consecutive years of negative growth. However, under the background of good domestic automobile environment trend, life is not easy for most weak enterprises, and the utilization rate of serious excess capacity is the best proof.

According to the statistics of the Association, by the end of 2021, there were only 86 automobile enterprises with automobile sales statistics, and the capacity utilization rate was only 52.47%. It should be noted that the development of these 86 automobile enterprises is extremely unbalanced. According to the chart, there are 16 automobile enterprises selling more than ten thousand vehicles, 6 automobile enterprises selling between 200,000 and 600,000 vehicles annually. The total sales volume of these 22 automobile enterprises in 2021 is 19.066 million vehicles, the total production capacity is 24.994 million vehicles, and the average capacity utilization rate is 76.2%. In addition, there are as many as 29 automobile enterprises with annual sales volume of less than 10,000 vehicles. In 2021, the total sales volume is 99,600 vehicles, the total production capacity is 4.922 million vehicles, and the average capacity utilization rate is only 2.02%.

While crazy expansion, while overcapacity, domestic car enterprises in the "volume" what? The data shows that there are 11 automobile enterprises with capacity utilization rate higher than 100%, and 4 new energy automobile enterprises with capacity utilization rate also reaching 100%. Take Dongfeng Honda as an example, it currently has three complete vehicle factories in China, with a planned annual production capacity of 768,000 vehicles, but the sales volume of Dongfeng Honda will reach 793,000 vehicles in 2021. Therefore, Dongfeng Honda takes over the second factory of Shenlong Automobile to prepare new energy factory. Take Tesla China as an example, at present, its monthly delivery volume is maintained at the level of 50,000 vehicles, and the capacity utilization rate reaches 100%. However, Tesla's demand in domestic and foreign markets is getting higher and higher, so rumors such as building factories and acquiring production lines continue to spread.

A few years ago, some automobile enterprises were too optimistic about the future development, so they expanded wildly, and as the competitive pressure intensified, the sales volume of these automobile enterprises began to decline, resulting in a large amount of waste of production capacity. At present, the marginalized automobile enterprises are mainly divided into three categories, one is the third-line joint venture brands represented by Shenlong Automobile, Beijing Hyundai, GAC Fick, Dongfeng Yueda Kia and Dongfeng Renault. Some of them have extremely low capacity utilization rate, and some have announced delisting. Take Shenlong Automobile as an example, it created the peak of 704,800 vehicles in 2015, and the ambitious Shenlong Automobile began to hit the target of one million vehicles. In order to meet the market demand, it is planned to build four automobile factories, among which the first factory, the second factory and the third factory are located in Wuhan, Hubei Province, and the fourth factory is located in Chengdu, Sichuan Province. The planned annual production capacity of these four factories is 300,000 vehicles, 150,000 vehicles, 300,000 vehicles and 360,000 vehicles respectively, and the total planned annual production capacity exceeds one million vehicles. However, since then, the sales volume of DPCA has begun to decline, falling by 15.2%, 36.85%, 32.89%, 55.17% and 55.74% respectively from 2016 to 2020, with sales falling for two consecutive years, and sales volume will be only 50267 vehicles by 2020. At its peak, Shenlong Automobile once planned a million production capacity, but at present, the annual sales volume of only 100,000 vehicles is far from enough, and the capacity utilization rate is seriously insufficient, so it is imperative to dispose of excess capacity. It is understood that Shenlong Automobile will sell a factory in 2019, and in February, according to domestic media reports, Shenlong Automobile No.2 factory has been officially taken over by Dongfeng Honda and will be transformed into a pure electric vehicle factory. Both parties confirmed the news. However, even if there are only two production bases of Wuhan No.3 Factory and Chengdu No.4 Factory left, according to the cumulative sales volume of 100567 vehicles in 2021, even if the sales volume of DPCA doubles in 2022, more than half of the production capacity is still idle. In addition to Shenlong Automobile, Beijing Hyundai has sold a factory to the new power brand ideal car, and even if Beijing Hyundai sells a factory, its capacity utilization rate is still less than 30%. Dongfeng Renault announced its withdrawal from the Chinese market in 2020.

The second category is the independent automobile enterprises that continue to wander at the edge of the market. They have no strong support behind them, and at the same time fail to keep up with the pace of market development, and finally go bankrupt because of the break of capital chain. Since 2019, rights protection events of dealers including Huatai Automobile, Zhongtai Automobile, Beiqi Yinxiang, Cheetah Automobile and Lifan Automobile have been staged continuously. Finally, factories of many automobile enterprises have been merged and acquired by head enterprises, such as Geely taking over Cheetah Automobile Factory located in Changsha and Great Wall Automobile taking over Zhongtai Linyi Factory.

In addition, even if China Automobile, Xiali Automobile and other automobile enterprises rely on powerful groups, they will eventually move to the edge under the influence of various factors. Take Zhonghua Automobile as an example, it is backed by Brilliance Group, which is a large-scale vehicle manufacturing enterprise controlled by SASAC of Liaoning Province. It directly or indirectly holds shares, including Brilliance China, Shenhua Holdings, Jinbei Automobile and Xinchen Power, while the joint venture brand Brilliance BMW is sitting on the throne of luxury car market. However, Brilliance Zhonghua originally had a good foundation, whether Brilliance BMW or Brilliance Jinbei were in the leading position, while Brilliance Group did not continue to strengthen independent technology research and development to ensure the continuous improvement of product strength, but passively responded to laws and regulations and fierce competition, and was finally ruled bankrupt and restructured.

It should be noted that under the background of serious overcapacity of domestic passenger cars, 10.46 million units of production capacity under construction will still be completed and put into production for six consecutive years, and most of the capacity under construction is new energy vehicles. Although some automobile enterprises have activated resources through the acquisition of production capacity, for automobile enterprises developing new energy vehicles, they prefer to build new factories because the renovation cost of old factories is relatively high, and some old factories do not meet the standards for the production of new energy vehicles. On the other hand, local governments have also expressed a positive attitude towards the landing of new energy vehicle projects. In addition, because it concerns people's livelihood and economic development, even if it is an automobile enterprise on the verge of bankruptcy, the local government will still contribute to rescue it, which will eventually lead to the poorly managed automobile enterprise becoming a zombie enterprise with idle production capacity and unable to delist.

In addition, cross-border car-building crazy enclosure factory expansion capacity matter, after all is "enclosure" or "car-building" has also become a hot topic in the market. Taking Evergrande Automobile as an example, according to the planning of Evergrande Automobile, its total production capacity will reach 1 million vehicles/year in 2025 and 5 million vehicles/year in 2035, which comprehensively explains the willfulness of real estate enterprises to build vehicles. However, with the break of Evergrande Group's capital chain, the target of vehicle building has become a dream of Nanke. The first model Hengchi 5 is planned to be listed in the second quarter, so whether it can be sold is a problem.

The market is cruel. No matter how big the Chinese market is, there is no room for hundreds of automobile factories to divide the cake together. Now, whether they are independent, joint venture or foreign-funded automobile enterprises, they are facing the market test together. The market is fair, no brand, core technology, capital car enterprises, will fall one after another.

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