Overcapacity of the Chinese Automotive Industry: Factory Operating Rate Drops Below 60% in 2014
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- Overcapacity in China's automotive industry began to significantly increase in 2011. By the end of 2014, excess capacity stood at 16.06 million units, operating ratio dropping below 60 percent for the first time in six years. Operating ratio differs from maker to maker, European, US and Korean automakers are operating at over 90 percent capacity while Japanese at 78.8 percent.
In contrast, Chinese manufacturers' operating ratio was a mere at 43.5 percent in 2014, putting pressure on business performance.
- Chinese automakers' overcapacity problem is deeply tied to stagnating sales. Chinese consumers prefer large automobiles, while the core products of Chinese automakers are A (mini) and B (small) segment models whose market decreased 5.5 percent to 2.14 million units in 2014.
- In addition, the introduction of China 4 emission standard on diesel vehicles negatively impacted the commercial vehicle market, driving down sales of Chinese automakers. Also, registration restriction of new vehicles introduced by Beijing, Shanghai, Tianjin and other large cities increases ownership cost, turning away consumers in these cities from Chinese automobiles and channeling them toward high-quality foreign products. Moreover, foreign brands quickly reacted to stagnating sales by reducing prices, making an effort to control sales decline. Chinese automakers haphazard facility investment was another reason for ballooning overcapacity. Triggered by an over 30 percent annual increase in automobile production for two consecutive years in 2009 and 2010, local automakers built new plants without stopping for the next five years.
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World Sales Volume of Tata Motors Declines 9.4 Percent to 970,000 units
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Inovev foresees a production of 60 000 units per year in Europe for the Hyundai Creta
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- The global market for B segment vehicles is growing. It could reach 2 million units in 2015, against 1.7 million in 2014, 1.2 million in 2013 and 0.7 million in 2012. In Europe (including Russia and Turkey), the production of SUVs will increase by 37% to reach almost one million units in 2015 compared to 2014. The market leaders are the Renault Captur (200 000 units in 2015), Peugeot 2008 (170 000 in 2015), Opel Mokka (140 000 in 2015) and Nissan Juke (125 000 units in 2015).
- In this context, the Korean manufacturer Hyundai introduced its new segment B SUV, the Creta, that in fact reuses the entire model presented and marketed in China since last year under the name iX25.
- The Creta (named after the Mediterranean island) will be marketed in Europe and Russia from 2016. Inovev forecasts a production of about 60 000 units per year in Europe. The models sold in Europe and Russia will come initially from South Korea, but if success in this market is significant, it is possible that this model may be manufactured locally in the Czech Republic (on the site of Nosovice) or Turkey ( on the site of Izmit). The Czech site has a capacity of 300 000 units per year (production in 2014: 250 000 units). The Turkish site has a capacity of 200 000 units per year (2014 production: 200 000 units), which could however be increased to 300 000 units per year.
- The Creta, 4.27 m long, 1,78m wide and 1.63 m high, will be available in Europe with petrol and diesel engines of 1600cc, already available today in the Hyundai range. In view of recent releases from the Hyundai-Kia group, it would not be surprising to see in a year or two, a comparable model in the Kia range being launched, even if the Soul (4.14 m) currently attempts to fulfil this gap in the market, it has a fairly limited success.
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Inovev expects an production of 50 000 BMW 7 Series per year
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- The market for segment F vehicles represented 600 000 global sales in 2014, including 300 000 sedans and almost as many SUV, the rest being coupes and convertibles. The main sedans available in this segment are the Mercedes S-Class (80 000 units produced in 2014), BMW 7 Series (42 000 units in 2014), Audi A8 (30 000 units in 2014), Jaguar XJ (20 000 units in 2014 ) and Lexus LS (17 000 units in 2014). In Europe, the first four models mentioned above are the bestselling models, while in the USA and China, the Lexus LS is one of the best selling models. In the USA, the equivalent models from Cadillac and Lincoln have gradually disappeared, but Cadillac will return in this segment with the upcoming launch of the CT6 that will try to shake hierarchy in its home market and in China.
- It is in this context that BMW introduced the sixth generation of the 7 Series. Built like all 7 Series on the site of Dingolfing(Germany), the new 7 Series will attempt to compete with the Mercedes S-Class which was sold at nearly 80 000 units per year. Previous 7 Series only reached 50 000 units sold per year on average. Inovev expects for the new generation amounts equivalent to the previous one, i.e. 50 000 annual sales.
- The new 7 Series is distinguished by a weight loss of almost 130kg compared to the previous generation, with a mixed composition of carbon fibre reinforced plastic, aluminium and high-tensile steel. It will again be available in two lengths (5.10 m and 5.24 m, i.e. 2.5 cm more than the previous generation).
- The new model will be equipped initially with a six-cylinder petrol engine 3.0-liter turbo developing 320hp (740i), an eight-cylinder petrol 4.4-liter bi turbo 445hp (750i) and a four-cylinder engine 2.0 litter turbo coupled to an electric motor developing 326hp (740i), the latter being a plug in rechargeable version that will be marketed in the first half of 2016.
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Inovev foresees a production of 15 000 units per year for the future Fiat pick up
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- While Renault and Mercedes have recently announced their will to both market a midsize pickup based on the next generation of Nissan Navara pick-up, for its part Fiat has just announced that it will market a pickup (which will be the same size) based on the Mitsubishi L200 pickup.
- These announcements highlight the interest of major manufacturers for the midsize pickup category whose sales are expected to grow significantly in emerging markets, including South America, Southeast Asia, Africa and the Middle East. In 2014, nearly two million pickup in its class were sold worldwide, the main actors are the Toyota Hilux (450 000 units in 2014), Isuzu D-Max, Mitsubishi L200, Ford Ranger and Nissan Navara.
- The Fiat badged model will be manufactured by Mitsubishi in Thailand (which is a country specialized in producing midsize pickups), on the same assembly lines as the recently restyled L200. For Fiat, it is an opportunity to embark on a segment where it is not present. For Mitsubishi, this partnership will increase its production volumes in Thailand and worldwide to compensate the termination of SUV deliveries for the PSA group (Peugeot 4008 / Citroën C4 Aircross).
- The new Fiat pickup will be marketed in Europe and South America from 2016. No sales forecast has been announced. Inovev expects a production of 15 000 units per year, i.e. 1/10 of the volume of the Mitsubishi L200.
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