China EV overcapacity fix would be a crowd pleaser

China has admitted its electric-car drive has gone too far. The country’s vice minister of industry and information technology on Friday pledged to reduce EV makers’ overcapacity, saying that the government will take “forceful measures to prevent superfluous projects.” Amid a brutal price war at home and heightening trade tensions abroad, it’s a welcome step.

Beijing’s support for battery-powered rides has helped homegrown champions like BYD (1211.HK), (002594.SZ), opens new tab and Geely Automobile (0175.HK), grab share in the world’s biggest car market, as well as make the country the world’s largest auto exporter. But racy growth has inspired many cash-strapped provinces to transform into manufacturing hubs similar to Anhui, home to $10 billion Nio’s (9866.HK), production lines. Excess capacity could be between 5 and 10 million vehicles per year, estimates consultancy Automobility. Last year, the European Commission launched an investigation into low-cost Chinese EV imports.

The challenge will be how to stem overcapacity without hurting the sector – seen as a technological and manufacturing bright spot for the otherwise grim Chinese economy. At the very least though, acknowledging the problem is a good first step.(By Katrina Hamlin)

Source : Reuters