Foreign Car Factories Cut down Output in China


Published Date : Aug 24, 2015

The foreign car factories in Shanghai, which were at one time the busiest in the world are beginning to slack off. Owing to weakness in the largest car market in the world, companies such as Volkswagen AG and General Motors Co. are forced to operation at less than full capacity the first time, as per industry data.

The largest automakers in the world that have benefitted extensively from Chinese consumers due to their increasing appetite for high end goods, have already stated slowing sales as the economy cools. 

Although, the auto market is expected to expand in the long-term, curbing of production already suggests that boom times are over, which is also an indicator of bumpier ride for the largesse auto makers in the world that were betting on escalating Chinese demand.

In the first half of 2015, for the total utilization rate of the 23 major car= making ventures in China– the country requires foreign car makers to collaborate with local partners. For te first time, the numbers fell below 100%, displaying 94.3% utilization against 107.4% in the year before, as stated by a study by Sanford C. Bernstein.

Car-makers were able to work above 100% utilization capacity with added work shifts to cater to the high demand.

A joint venture between the largest auto maker in China SAIC Motor Corp. and GM, known as SAIC General Motors, manufactured 2.4% fewer cars in the first half of this year in comparison to the previous year, as stated by data from a trade organization, China Passenger Car Association.

In the same period, a joint venture between Volkswagen and a Chinese auto maker, FAW-Volkswagen Automobile Co., manufactured 1.2% lesser cars. However, the joint venture between Volkswagen and SAIC is one of the three to have increased capacity utilization in the first half of the year.