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In the first half of this year, Dongfeng car sales totaled 1.6981 million units, down 11% from the same period last year, and declined again in the first half of this year after a year-on-year decline in 2018.

In recent years, Dongfeng Motor has been supported by Nissan brands, the sales of independent brands and Korean and French joint ventures have fallen off a cliff, and its capacity utilization has also fallen to a freezing point.

The continuous decline of China's automobile market has caused great pressure on many automobile enterprises, and the sales volume of many automobile enterprises has shown negative growth. At the same time, the output of most automobile enterprises accounts for only a small part of their production capacity. Dealing with excess spare capacity has become one of the urgent problems for automobile companies.

In the face of idle capacity caused by declining sales, some car companies with reduced sales have laid off, stopped production, or abandoned some brands in order to reduce costs. however, some car companies choose to lease the idle process to new car-building forces by contract manufacturing, such as Guangzhou Automobile and Lvlai, Changan and Green Chi, FAW and Xinte, and so on.

For the slow development of car companies, OEM has undoubtedly solved the huge loss of idle production capacity, and for the new forces of car manufacturing, the production qualifications and technology of traditional car companies are also needed.

Prior to this, the media exposed Dongfeng Yulong plant stagnant, Dongfeng Yulong refuted the rumor, and said that Dongfeng company's current business is normal. However, as the environment intensifies, it is hard to hide the continuing decline in sales and overcapacity.

It is understood that Dongfeng Yulong currently has a production capacity of 240000 vehicles, with idle capacity reaching 90 per cent in 2018. The average monthly sales of Dongfeng Yulong fell to 100 vehicles in the first half of this year, and idle capacity was further expanded.

It is worth mentioning that Dongfeng Yulong already lost money in 2015, and the loss expanded to 1.4 billion in 2017. Dongfeng Yulong's current situation can be said to be the epitome of Dongfeng Motors, and the sales of other brands, such as Dongfeng scenery, style, demeanor and Fengshen, are not optimistic.

In addition, Dongfeng Motor Joint Venture Dongfeng Yueda Kia also showed weakness. On June 17, Dongfeng Yueda Kia announced that it would lease the first factory to Chinese Express OEM. And behind the rental, it also shows a lot of helplessness. Dongfeng Yueda Kia sold 162700 vehicles in the first half of this year, with utilization falling to 18 per cent from 40 per cent in 2018. After the closure of the first plant, the capacity of the remaining two factories dropped to 750000 vehicles, but the capacity utilization rate will not be very high in terms of current sales.

In addition, on the basis of a 62% drop in sales in the first half of the year, the capacity utilization rate of French car DPCA was only 22%, while that of joint venture brands such as Dongfeng Renault and Dongfeng Infiniti was also less than 50%.

According to data from the China Automobile Association, by the end of 2017, Chinese car companies had an annual production capacity of about 64 million vehicles, while the actual production capacity that year was only 29 million vehicles, with capacity utilization of no more than 50 per cent.

Since 2018, China's auto industry's first sales decline for the whole year was only 28.08 million vehicles, down 2.8 per cent from the same period last year. By 2019, the situation still did not improve, with sales of narrow passenger cars falling 9.3 per cent year-on-year to 9.954 million in the first half of the year.

Industry analysts said that based on the current market environment, it is also difficult to return to the level of growth in the short term, and the problem of overcapacity will continue to intensify.

At the beginning of this year, Dongfeng Motor set a "double 400" target, with a first-class operating profit of more than 40 billion yuan and annual car sales of 400000 vehicles. However, as of June this year, the target Dongfeng Motor has completed only 42%, and the capacity utilization of its brands also highlights the grim situation of Dongfang Group.

Some people in the industry said that the capacity utilization rate will further decline next, but overcapacity is not the main factor, and only when the market is in the doldrums will there be overcapacity in building cars, so at present, there is still some room for growth in China's automobile market.

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