China to limit new assembly plants to ease capacity glut
China’s top state planner said it would tighten regulations for building assembly plants for traditional gasoline-burning vehicles, as the country cracks down on "zombie" automakers.
The policy, issued by the National Development and Reform Commission on its website, extends to the automotive sector Beijing's fight against overcapacity and "zombie" companies that is underway in the coal and steel sectors.
Zombie companies are economically unviable enterprises that often survive with the support of local governments and banks. China has vowed to use tougher environmental, efficiency, quality and safety standards to drive them out of the market.
Automakers that want to build assembly plants to produce gasoline-burning vehicles should have operated above the national average production capacity utilization rate for the previous two years, the commission said.
Also, these companies must demonstrate that they produced a higher proportion of electric vehicles than the industry average in the previous year, the commission added.
These automakers would need to spend at least 3 percent of operating income on r&d, and produce cars deemed to be internationally competitive, the commission said.
The measures also stipulate minimum requirements for new engine factories.
The policy will encourage zombie automakers to exit the market, saying it is targeting companies that have partially halted production, rely on rolling over bank loans to survive or have lost money for consecutive years.
The document also promoted orderly development of battery-electric and plug-in hybrid vehicles, broadly repeating existing rules for new factories in this segment.
Zombie companies are economically unviable enterprises that often survive with the support of local governments and banks. China has vowed to use tougher environmental, efficiency, quality and safety standards to drive them out of the market.
Automakers that want to build assembly plants to produce gasoline-burning vehicles should have operated above the national average production capacity utilization rate for the previous two years, the commission said.
Also, these companies must demonstrate that they produced a higher proportion of electric vehicles than the industry average in the previous year, the commission added.
These automakers would need to spend at least 3 percent of operating income on r&d, and produce cars deemed to be internationally competitive, the commission said.
The measures also stipulate minimum requirements for new engine factories.
The policy will encourage zombie automakers to exit the market, saying it is targeting companies that have partially halted production, rely on rolling over bank loans to survive or have lost money for consecutive years.
The document also promoted orderly development of battery-electric and plug-in hybrid vehicles, broadly repeating existing rules for new factories in this segment.
