Foreign carmakers also have a China overcapacity problem

OVERCAPACITY in China’s auto manufacturing has become an acute point of tension between the country and other big economies. The complaint heard from the West is, broadly, that Beijing’s industrial policy has unfairly advantaged Chinese companies, resulting in an impending tidal wave of below-cost exports. In turn, this has raised fears of an existential crisis for national marques including Germany’s Volkswagen, Japan’s Toyota and American icons of General Motors (GM) and Ford.

Western fears deepened as China last year overtook Japan as the world’s biggest auto exporter. This year exports continue to break new records – about one in five cars made in China are now shipped abroad.

Although about 80 per cent of China’s auto exports are cars with internal combustion engines, the boom in Chinese uptake of low-cost, high-tech electric vehicles has drawn protectionist reactions from the US and the European Union (EU), both of whom have hiked tariffs on made-in-China electric vehicles (EVs) over recent months.