Behind the spectacular rise of the Chinese automobile industry: a precarious balance between production surplus and bankruptcy risks

The rapid development of the Chinese automotive industry is both impressive and concerning. While China boasts being the world's largest automobile exporter, the reality on the ground presents a much more nuanced picture. Indeed, behind the eloquent production figures lies a true puzzle: production capacities that now seem to undermine the foundations of a booming industry.

A bold but disorderly strategy 🚗

To understand the colossal rise of manufacturers like BYD, NIO, or Geely, it is crucial to dissect China's industrial policy. Since 2010, the government has implemented a real battle plan, equipped with generous subsidies and tax incentives to stimulate innovation and local expertise. The “Medium- and Long-Term Development Plan for the Automotive Industry” set ambitious goals, aiming for a production of 35 million vehicles per year by 2025.

This strategy, although effective at first glance, has encouraged a phenomenon of overproduction. Provinces, eager for quick results, are in a true race to establish new factories, often without real market justification. This decentralized dynamic has thus led to a production capacity twice that of the actual demand, exacerbating fears of an imminent collapse.

Current state of the industry	2025 goal
31 million vehicles produced annually	35 million vehicles per year
Excess production capacity	Aim for strong competitiveness in the global market

The pains of overproduction 💔

Faced with this trend of overcapacity, the Chinese automotive industry finds itself trapped in an infernal cycle of price wars. Indeed, to sell their stocks, manufacturers do not hesitate to mark down their vehicles. Electric cars are now being sold for less than 10,000 euros, a price nearly unimaginable in Europe or the United States.

• ✨ Less than 10,000 euros for an electric model
• 🔖 Discounts of over 60% on certain SUVs
• 🏪 70% of dealerships are not profitable

This reduction in prices has dramatic consequences. According to the China Automobile Dealers Association, only 30% of dealerships are showing profits. To achieve unrealistic goals, some dealers even register unsold vehicles, thus counting them as "sold." The market becomes increasingly obscure each day, giving rise to an ecosystem of phantom sales.

An uncertain future 🌧️

The situation is not only affecting China, but its effects are rippling internationally. With prices that are on average 40% lower than those of competing Western vehicles, SAIC Motor, Chery, and other giants are making their European counterparts shudder. This phenomenon of production surplus is pushing some countries to take preventive measures, such as the United States distancing itself from new Chinese entrants for national security reasons.

Beyond this bubble, a question arises: how many Chinese manufacturers will come out on top? According to AlixPartners, by 2030, only 15 of the 129 brands still existing are expected to survive. This alarming figure highlights the urgency for a massive restructuring of this sector. Players like XPeng assert that one must sell at least three million vehicles per year to operate viably.

Industry statistics	2030 forecasts
129 brands currently active	Only 15 viable brands
30% of profitable dealerships	Essential consolidation

In summary, the Chinese automotive industry, while it has demonstrated incredible growth potential, finds itself at a crossroads. The fragile balance between innovation and overproduction could well lead to disillusionment if radical reforms are not undertaken swiftly. The government and businesses must act, not only to support the industry but to ensure that it evolves within a sustainable and competitive framework. The road ahead is still long, but the future of Chinese automobiles could well be drawn with the caution of diplomats and the dynamism of pioneers 🚀.

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