China has “too many” EV manufacturers; minimum production capacity utilisation limit considered

China has “too many” electric vehicle makers, and the government will encourage consolidation, said its minister of industry and information technology Xiao Yaqing, reported Automotive News Europe.

“The [electric car makers] are small and scattered. The role of the market should be fully utilised and we encourage merger and restructuring efforts in the EV sector to further increase market concentration, Xiao said. The Chinese government is drawing up measures to pull back on overcapacity in this sector and instead channel resources to key production hubs, Bloomberg reported last week.

Among those measures being considered is a minimum limit on production capacity utilisation for the industry, where provinces which do not meet those limits will not be permitted to approve new projects until surplus capacity comes online, Bloomberg wrote.

The average capacity utilisation rate by automakers in China was around 53% last year, based on calculations made from a Jiangsu province submission to the country’s national development and reform commission earlier this year, according to Automotive News Europe. A Xinhua report in April citing official statistics found that China has around 300 electric vehicle makers.

The growing EV presence in China has been driven by its government’s subsidies which encourage consumers to change their existing vehicles for less polluting ones, termed by China as new energy vehicles. Total subsidies by China’s central government for purchases of new energy vehicles tallied around 33 billion yuan (RM21.3 billion) in the five years through 2020, according to data from the country’s ministry for industry and information technology.

In response to the subsidies, provincial authorities offered tax breaks and other incentives for EV makers to set up facilities, which has led to these facilities mushrooming and not producing vehicles at capacity. According to Automotive News Europe, the Jiangsu province north of Shanghai is now home to around 30 automakers, and several of these have already gone bankrupt.

German brand Borgward and its manufacturing facility in Beijing have most recently been the subject of a planned purchase by Chinese tech giant Xiaomi, and the plant is reported to have an annual manufacturing capacity of 180,000 units.

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