Auto industry overcapacity is just temporary: insider

The overcapacity problems of China's auto industry are temporary and demand remains strong, Zhang Fangyou, chairman of Guangzhou Automobile Group Co, said at the Boao Forum for Asia 2012.

"Auto demand in China is still huge and on an upward trend," Zhang said. He predicted the country's auto sales growth this year would exceed its growth in GDP.

Weighed down by the sluggish global economy and domestic economic adjustments, the country's auto industry is currently experiencing temporary overcapacity, but "the number of vehicles per capita is still less than the average level of developing countries, let alone the level in developed countries," Zhang said.

Concerning the domestic overcapacity issues, Zhang noted that demand for higher performance vehicles always exceeds supply.

Workers at auto companies with stronger competitive power usually have to work overtime, Zhang noted, but lower-end enterprises may have to reduce supply and cut prices.

The total auto sales volume last year was 18.4 million units, according to the China Association of Automobile Manufacturers. Meanwhile, the total annual output of China's 30 largest carmakers is set to reach over 31.2 million vehicles by 2015, according to the National Development and Reform Commission.

China's car production capacity will far exceed market demand by the end of the 12th Five Year Plan period (2011-15), the official Guangming Daily reported in November last year, based on information from local governments.

Zhang said that auto companies would have to upgrade their industrial structures and develop new growth areas, such as new-energy vehicles, as well as improving their business efficiency.

Guangzhou Automobile plans to produce around 200,000 new-energy vehicles during the 12th Five Year Plan period, and testing of its self-developed electric autos has already started, Zhang noted.

But the success of new-energy vehicles will depend partly on supportive policies from the government, as well as construction of related facilities such as charging stations, said Zhang.

"Consumers' awareness of environmental protection will also play an important role in new-energy auto development," he noted.

Guangzhou Automobile floated on the Shanghai Stock Exchange on March 29, completing the last stage of its plan for a dual listing. The company went public in Hong Kong in 2010.

The Shanghai listing makes Guangzhou Automobile the country's first State-owned auto group to list on both the mainland and Hong Kong exchanges, and will help the company to increase the pace of its industrial restructuring and generate higher investment returns, Zhang noted.