By on January 24, 2010

On the back of a 45 percent growth that propelled Chinese car sales to 13.6m in 2009, and faced with a shortage of cars that doesn’t allow them to feed China’s ravenous appetite for even more cars, Chinese automakers are racing to build more plants. The combined capacity of the 10 largest players is expected to balloon from around 12 million units in 2009 to a breathtaking 21 million in 2012, today’s Nikkei [sub] reports.

Some examples:

SAIC, which has joint ventures with  GM and VW, plans to raise its capacity by 30 percent come 2012. SAIC Group has set 2010 sales target at 3 million units, up from 2.72 million units last year, Hu Maoyuan, the company’s chairman, said Saturday to state news agency Xinhua

FAW, China’s second-largest maker after SAIC, has plans to nearly double its output capacity by 2012. FAW has big expansion plans with its joint venture partners Volkswagen and Toyota. FAW Group has set its sales target for 2010 at more than 2.3 million units, an increase of 18.3 percent from a year earlier, Xinhua says in the same report.

Chang’an plans to build a new plant to be jointly operated with Ford.

Even with the auto boom, capacity utilization at major Chinese auto makers was 80 percent in 2009, J.D. Powers reckons. For 2012, J.D. Powers projects 70 percent of utilization. The Chinese government has already warned that the industry could eventually face excess capacity.

India may be heading into similar problems.

In the meantime, formerly swashbuckling Volkswagen has grown cautious. The company had profited heavily from growth in emerging markets, especially China. They just cut back their global sales projections by 67 million vehicles for the period through 2018, Germany’s Automobilwoche [sub] reports, citing an internal paper by VW sales chief Detlef Wittig to the board. Wittig prepared his bosses to basically strike a whole year of production from their plans. Obviously, “this effect would lead to lower group deliveries to customers versus the previous plan, and as a result to a lower financial result,” the letter says.

His boss Martin Winterkorn sticks to his plan to unseat Toyota as the world’s largest auto maker by 2018. They probably bet on Toyota running into a similar soft patch.

More or less? Workers at Volkswagen plant in China. Picture courtesy the thedetroitbureau.com

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14 Comments on “China Adds Capacity For 21m Cars. Volkswagen Gets Cold Feet...”


  • avatar
    Cammy Corrigan

    This is actually a smart move by VW. 2010 looks far from stable and VW looks like they are trying to insulate themselves from it. I suppose they don’t want to over expand, which makes sense.

    Incidentally, this article* believes that China is due a crash soon. Could someone cast a critical eye over it? It makes sense to me, but don’t know the likelihood of it.

    * = http://www.csmonitor.com/Commentary/Opinion/2010/0121/China-the-world-s-next-great-economic-crash

    • 0 avatar

      Cammy:

      I don’t even need to read the article. The name of the author suffices: Gordon G. Chang. This Glenn Beck & Call nutcase predicts China’s downfall about once a year, and it doesn’t faze him that it’s not happening.

      The only thing I can’t understand is why anybody still prints him, given his abysmal track record.

      See also: https://www.thetruthaboutcars.com/gordon-g-chang-chinas-car-sales-are-a-fraud/

      For a better view: http://www.ft.com/cms/s/0/00f770a8-06cb-11df-b058-00144feabdc0,dwp_uuid=9c33700c-4c86-11da-89df-0000779e2340.html – That’s a Nobel Prize laureate, FWIW

  • avatar
    Mike999

    Good to see you looking at the Chinese market.
    – What does this say about world Oil Consumption?

    Did you guys know that FOX news is partially owned by Saudi’s?
    Could that be why they’re selling an Anti-Global-Warming, Anti-Peak-Oil talking point?

    Did you guys see the Supreme Court will now allow FOREIGN MONEY to effect US Elections?
    Most of you guys voted for these crackpots.
    Watch what they do now.
    Destroy the country…

    • 0 avatar
      johnny ro

      The US public may indeed be getting what it deserves from its government, but citizens don’t elect supreme court justices.

    • 0 avatar
      ClutchCarGo

      The US public may indeed be getting what it deserves from its government, but citizens don’t elect supreme court justices.

      No, but we elect the president who appoints them and the Senate that confirms them. Our only immediate hope is that Congrees will at least require full and open disclosure of who is buying the elections, and our only long-term hope is for a reconfigured Supreme Court that is willing to revise this recent revision of a century of established legal precedent.

    • 0 avatar
      50merc

      It’s laughable to see the Left’s hand-wringing over the Court’s opinion on McCain-Feingold. Obama’s 2008 campaign had $750 million (far more than anyone else, ever) and it wasn’t by collecting dimes from Boy Scouts. “Follow the money,” Deep Throat said. Well, that’s not easy inasmuch as Obama’s campaign overrode the default mechanism for identifying credit card donors. They must think the objective justifies the means.

      Speaking of identifying, the Court didn’t disturb disclosure requirements.

  • avatar
    mpresley

    Cammy Corrigan points us to an article stating: Beijing, ignoring advice from Washington…did not in the boom times try to restructure its economy to favor consumption. Instead, the Chinese government sought to take maximum advantage of then-surging foreign demand.

    Only in a liberal Western journalist’s view could savings, as opposed to consumption, be considered unenlightened. Be that as it may, the US (and much of the developed world) have turned China into their manufacturing base. As Western countries weather the recession storm, Chinese exports will accordingly suffer, however Chinese savings must eventually be spent on consumer goods that are, surprise, made in China. And imagine: a bankrupt “Washington” lecturing China on economics.

    Regarding VW: I drive them, but scratch my head when I hear that they are planning to take over America. Are these people serious? A niche player, yes. But until they fix “the peoples” (god their ads are goofy) perception that owning a VW is like owning a money toilet…well, I sometimes just don’t know what they could be thinking (or drinking). Oh well, as long as VW keeps offering 20 different sets of alloy wheels to choose from, all will be well.

    • 0 avatar

      Regarding VW: I drive them, but scratch my head when I hear that they are planning to take over America.

      Stop scratching, bad for your scalp. They don’t want to take over America. Far from it. They want to take over the world. In the U.S.A. VW only wants to triple its anemic sales by 2018. Which is ambitious enough.

  • avatar
    Omoikane

    For a coutry of 1.3 billion people, 21 mil. cars production capacity is not going to be enough.
    And J.D.Power’s 80% capacity utilization estimate surely doesn’t square with the reports about 3 months long waiting lists and 2-shift plants running 3 shifts.

  • avatar

    I think J.D. Power is just making it up. It’s quite hard to get these numbers in China. China has more than 100 manufacturers. The growth was in the big ones.

    With 15 percent growth annually, China will sell 21m cars in 2012, 100% capacity utilization again …. Assuming a growth rate of 10 percent, we’ll be looking at 18m cars in 2012, 86 percent utilization…..

  • avatar
    NulloModo

    If VW wants to take over the world, it will need to do a lot more than triple the US marketshare. China has momentarily taken the lead from the US in car sales, but done so in a year when US sales are at an all time low while China’s were at an all time high, a situation that will hopefully right itself soon. While everyone likes to quote the huge population of China, a majority of them are rural poor who will not have enough money for a car for decades yet to come, if ever.

    Regarding the Chang article, some of it makes sense, and some of it doesn’t. In particular his theory that China dipping into its foreign currency reserves to convert them to RMB for domestic consumption would somehow raise the value of the RMB makes little sense to me (granted though, I’m not an economist). Wouldn’t flooding more of the local currency into the economy devalue it overall, causing inflation?

    Following a link to a link there was a neat little video (on Al Jazeera English of all places) about the Chinese city of Ordos, and how it was built with stimulus money, and pretty much sits empty. Living in South Florida, I know a lot about communities and developments sitting in partial states of completion, empty, and they do nothing to help the local economy.

    What really gets my goat is that many in the US don’t see the rise of China as something that needs to be stopped or as a serious threat. We are somehow content to let another nation slowly usurp our status as the world’s largest and most important economy. Out currency has lost a ton of value, it is virtually even with the Canadian dollar where it used to be worth at least 50% more, and has been worth less than the Euro for years. We let the EU dictate its regulations to our companies, ceded control of the Panama canal, and have made a whole host of other boneheaded moves. We no longer have the world’s tallest building or the world’s longest bridge, our leadership in space is about to expire as we’ll have to bum rides off of Russian rockets, and our public education system continues to slip down the international rankings despite (or encouraged by) ridiculous programs like NCLB. We’ve allowed corporations and a small number f the extremely wealthy to too greatly influence our government for their own gain at the expense of the nations pride, wealth, and opportunity as a whole. Hopefully Chang is right on some points and the whole mess in China will crash down on itself and create some type of economic vacuum that we can use to catapult ourselves out of this mess.

  • avatar

    The “raise the value of the RMB” part is one of the highlights of the “analysis.” Doesn’t everybody, Chang included, lobby that the RMB may free float? Well, it doesn’t, and it won’t anytime soon. The RMB is pegged against the $ at 6.83. Doesn’t matter how much flows any which way, it will stay at 6.83. Chang is a moron.

  • avatar
    th009

    Maybe “cold feet” isn’t quite the best term here — having read the Automotive News version of the story (sorry, no subscription or sufficient German skills to read the original) it sounds like Winterkorn is warning the VW managers that the global recovery may not be as strong as anticipated.

    VW is cutting their total global automotive market size estimate by 67M cars for the nine years 2010-2018, but there was nothing there to say specifically whether VW is adjusting its own volume targets or financial forecasts.

    On the other side, Marchionne is counting on a strong recovery for Chrysler’s (and maybe Fiat’s, too) survival.

  • avatar
    Michal

    And each one of those 21 million cars will need several barrels of fuel per year to run. Americans, Europeans nor Australians are more entitled to drive than newly automotive Chinese citizens. This isn’t about ‘us and them’, or ‘burning OUR oil’.

    I just hope they have contingency plans in place for when oil becomes much more expensive, leaving those new car owners in China high and dry, and demanding the government ‘do something’.

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