Expert warns of overcapacity in China's automotive sector

Nov 21, 2011, 8:04 GMT

Guangzhou, China - The Chinese automotive sector is showing signs of overcapacity as demand starts to wane while carmakers keep expanding, an expert said Monday.

'All suppliers are expanding in China, opening new factories, offering wider ranges,' said Ferdinand Dudenhoeffer, director of the US-based Center for Automotive Research.

'Overcapacity in China is clearly on the rise,' he said at the opening of the international automotive trade fair in Guangzhou, southern China.

The car market in China has been growing at more than 30 per cent annually for the last two years, but that growth is slowing, unlike the expansion by manufacturers, Dudenhoeffer said.

Attempts by Beijing to mitigate the overcapacity 'will not be completely successful,' he said, faced with the building surge by Volkswagen AG, General Motors Co, Ford Motor Co, the group composed of Hyundai Motor Co and Kia Motors Corp, the alliance of Nissan Motor Co Renault SA, and Toyoto Motor Corp.

A glut of small commercial vehicles was already evident, he said.

One victim of the slump was likely to be the Chinese manufacturer BYD, or Build Your Dreams, Dudenhoeffer said.

'The company took off like an eagle, but is now flapping like a chicken,' he said.

Luxury brands were not safe either, he said. 'Audi, BMW, Mercedes will also start to feel a headwind in the next year.'

'The economic climate is pushing down prices, the competition is making better offers,' he said. 'Profits in China will sink in 2012.'