Recently, during her recent visit to China, U.S. Treasury Secretary Janet Yellen repeatedly expressed concern about the "overcapacity" of some industries in China. Meanwhile, China's commerce minister, Wang Wentao, is visiting Europe and is likely to discuss the European Commission's investigation into whether Chinese-made electric cars benefit unfairly from subsidies.
These high-level exchanges show that China's new energy vehicles have attracted widespread attention around the world. However, Wang Wentao said that the rapid rise of China's electric vehicle companies is not because of subsidies, but because of "continuous innovation". In other words, it is the concept and practice of "continuous innovation" that has promoted the rapid emergence of Chinese electric vehicle companies in the global market.
Although subsidies have played a catalytic role in the market to a certain extent, what really makes enterprises gain a firm foothold is their continuous technological innovation and product upgrading. This innovation is reflected in the improvement of battery technology and the research and development of driving assistance systems, which is the fundamental reason for the rapid rise of China's electric vehicle companies.
On the issue of overcapacity, the relevant departments said that in the context of globalization, to judge whether there is overcapacity, from the perspective of global market demand and future development potential, the balance between supply and demand is relative, and imbalance is often the norm. Even foreign media believe that this practice violates the principles of economics and will affect the global response to climate change and green transformation.
There is no data to back it up
In fact, on April 10, Reuters published a short news article titled "China Has Been Shutting Down Idle Car Capacity," which involved only comments from people in the industry. But for answering the question of "overcapacity", the importance of this news is self-evident.
According to the article, senior officials of the China Association of Automobile Manufacturers revealed on Wednesday (April 10) that the capacity utilization rate of China's auto factories in 2023 will exceed 70%, while those underutilized capacity are being phased out. This move is seen as a key step in improving capacity efficiency.
Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, expressed optimism that the closure of these spare capacity will further improve capacity utilization. His view comes against the backdrop of Chinese automakers increasingly seeking overseas markets and expanding exports.
Recently, China's electric vehicle industry has been questioned by U.S. and European officials over export overcapacity. However, Cui Dongshu, secretary general of the China Passenger Car Association, made similar comments on Tuesday in defense of China's new energy vehicle industry, saying, "The mainland's new energy vehicle industry has not yet reached a serious level of overcapacity." ”
Moreover, Reuters previously reported that China's National Development and Reform Commission is cautious about approving the automaker's new electric vehicle production plans. This is mainly due to concerns about overcapacity and the possible impact of Tesla's price war. In such an environment, the NDRC is trying to balance market supply and demand to ensure the healthy development of the automotive market.
China, the world's largest market for pure electric and hybrid vehicles, has shown strong growth momentum in recent years. According to statistics, China's domestic sales of new energy vehicles surged by 36% last year, and this year, this figure is expected to continue to grow by 25%. This growth rate not only reflects the strong demand for new energy vehicles in the Chinese market, but also reflects China's leading position in the global new energy vehicle field.
However, despite the boom in China's new energy vehicle industry, its export-to-production ratio is still low compared to other major auto producers such as Germany, Japan and South Korea. This may imply that the potential of China's new energy vehicles in the global market has not yet been fully explored, but it also means that China's new energy vehicle industry still has huge room for development.
In the face of such rapid development, there are concerns that China's automotive industry may have overcapacity. After all, if the capacity is too large and the market demand can't keep up, then it is likely to result in a large number of cars piling up in the parking lot and no one cares.
However, based on Bloomberg's in-depth analysis of listed companies, we find that Chinese automakers' inventories are not actually too high. At the same time, data from the China Automobile Dealers Association also showed that dealer inventories did not show an abnormal increase. These data have alleviated concerns about overcapacity to some extent.
Of course, there are also some analysts who estimate China's auto production capacity. They believe that China's car production capacity could reach 50 million units or more. Compared to domestic sales of 22 million units, the utilization rate seems to be less than 50%. However, there may be certain problems with such calculations.
This is because these estimates often take into account backward production capacity or exaggerate the actual capacity scale. In this regard, Paul Kong, head of China automotive research at UBS, said that this overcapacity statement is actually exaggerated and oversimplified.
Indeed, an oversimplistic view is to ignore the essential difference between electric vehicles and internal combustion engine vehicles. Under the wave of new energy vehicles, the sales of traditional internal combustion engine vehicles are declining significantly. Therefore, it is clearly unreasonable to confuse the production capacity of electric vehicles and internal combustion engine vehicles.
Foreign media end up "refuting rumors"
JSC Automotive's estimates are more specific, noting that China's largest EV exporters, including BYD, Tesla's Shanghai plant and SAIC, all have capacity utilization rates of more than 80 percent. This means that these companies are very productive and have almost no spare capacity.
Camille Bourneoy, an analyst at Rhodium Group, also gave an in-depth analysis of this, and she believes that the internal combustion engine industry is actually more affected by overcapacity. And for the EV industry, overcapacity is concentrated in smaller, less competitive companies. These companies are likely to face an existential crisis due to their inability to adapt to changes in the market.
For advanced economies, however, the real problem they face may be the competitiveness of Chinese automakers. China's advantages in technology, local supply chains, new transportation infrastructure, and lower energy and land costs make Chinese automakers highly competitive in the global market.
While government subsidies play a role to some extent, their impact may be secondary compared to innovation. In fact, China is already ahead of the EU and the US in green technology.
Brenoir also added that China's largest exporter of electric vehicles is highly competitive in terms of quality and price. This is undoubtedly a major advantage of China's new energy vehicle industry in the global market. With the continuous development of the new energy vehicle market, we have reason to believe that Chinese automakers will play an increasingly important role in the global market.
In fact, China's EV industry has been questioned by U.S. and European officials over export overcapacity, a complex issue that needs to be looked at from multiple angles.
First of all, it should be pointed out that the Chinese government and enterprises have been actively promoting the development of the electric vehicle industry, and have taken a series of measures to promote technological innovation, improve product quality and expand the international market. In the process, the success of some companies also proves that China's electric vehicle industry has strong competitiveness and development potential.
On the issue of overcapacity, we need to recognize that overcapacity is a relative concept, not absolute. In some periods or regions, overcapacity may occur due to changes in market demand or other factors. However, this does not mean that there is a problem of overcapacity in the entire industry.
In addition, the Chinese government is also taking measures to encourage enterprises to transform and upgrade, optimize resource allocation and improve market competitiveness to cope with possible overcapacity.
It should be emphasized that the development of China's electric vehicle industry is in line with the global development trend and is also conducive to environmental protection and sustainable development. In this process, we need to adhere to the principle of innovation-driven and quality first, actively explore the international market, and strengthen cooperation and exchanges with international partners to achieve the goal of mutual benefit and win-win results.
At the same time, we must not ignore the dynamic changes and potential risks and challenges of the international market, and must always remain vigilant and take effective measures to flexibly respond to various uncertainties, including economic fluctuations, policy changes, etc., so as to ensure the healthy, stable and sustainable development of the electric vehicle industry.