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China Automotive Market Witnesses the Problem of Production Capacity Glut

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Published on : Sep 01, 2015

Going with the current flow of situations in the Chinese economy, it has been predicted that the situation in the economy may worsen. The sales have been slowing down with discounts on prices and greater concern over these discounts and their effect on the profit levels. As per the Chinese Automobile Manufacturers Association, the overall sale of vehicles in the month of July came down by 7.1% which marked a major low over the past seventeen months. 

The sale of cars of Volkswagen declined by almost 13%. Brilliance China Automotive Holdings, which is the Chinese partner of BMW, had also reported a drop of almost 45% during the initial half profit and there are fears manufacturers such as BMW, VW, and General Motors, and perhaps a few other international players in the automobile market will also report declining sales sometime soon. 

SAIC Motor Corp., already has business collaborations with VW and General Motors. According to market trends, the short term condition of the market may remain grim. This economic instability has come about at a time when the country is facing problems in the stock markets and there is a lot of uncertainty in the economic structure. Also, the concerns of the automobile market is magnified because of what is in store during the next one year; with an additional capacity of two million units. 

Volkswagen and Ford have come together with a few of their Chinese contemporaries in order to start newer facilities. Recently, Ford even acquired a local automobile plant which will become a part of the online retail market in 2016. Also, SAIC and General Motors will be starting assembly operations in a plant of Cadillac during the first half of 2016. Another independent partnership of GM with Wuling and SAIC will be starting an electric cars plant, which will also be manufacturing hybrids.