Date
30 March 2017
Aggregate utilization rate of 23 significant car-making joint ventures fell below 100 percent for the first time during the first half. Photo: AFP
Aggregate utilization rate of 23 significant car-making joint ventures fell below 100 percent for the first time during the first half. Photo: AFP

Foreign carmakers cut China output amid slowing sales

Foreign carmakers in China are running their factories at less than full capacity as the economy continues to slow.

Among these are General Motors Co. and Volkswagen A.G., the Wall Street Journal reports, citing industry data.

Global carmakers, which have been some of the biggest beneficiaries of Chinese consumers’ increasing appetite for upscale goods, have announced a slowdown in sales as the economy cools.

Although they expect the market to grow over the long-term, the production curb suggests the easy boom times are over, signaling a bumpier ride.

During the first half of 2015, the aggregate utilization rate of 23 significant car-making joint ventures fell below 100 percent for the first time.

The average rate was 94.3 against 107.4 percent a year earlier, according to a study by Sanford C. Bernstein.

China requires foreign companies to build cars with local partners.

SAIC General Motors, a joint venture between GM and China’s largest auto maker SAIC Motor Corp., built 2.4 percent fewer cars in the first half compared with a year earlier, according to the China Passenger Car Association.

FAW-Volkswagen Automobile Co., one of Volkswagen’s joint ventures in China, produced 1.2 percent fewer cars over the same period.

Volkswagen’s joint venture with SAIC was one of only three manufacturers to increase capacity utilization during the first half, according to Bernstein.

“From July through year-end we can have 10 days off a month. We were usually given two days off [a month],” said Eric Shi, an engineer for a General Motors plant in Shanghai, who said he used to work a lot of weekends.

“The situation seems worse than that of 2008” during the global financial crisis.

SAIC GM, owner of the plant, directed inquiries to GM’s Chinese headquarters, which said it manages production volumes to maintain inventories within a healthy range, and it is closely monitoring market conditions.

Global car makers such as GM, Volkswagen and BMW A.G. have been particularly sensitive to slowing China growth because after years of chasing rising sales there, they now get a significant amount of their revenue from the country.

China accounts for 35 percent of the Volkswagen group’s global vehicle sales, 35 percent of GM’s and 20 percent of BMW’s, according to the companies.

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CG/RA

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