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It is worth noting that the new production capacity of domestic power batteries in 2016 was 2.8 times that of 2015, while the production only increased by 82% year-on-year. Assuming all these production capacities are released, the power battery production capacity will reach 170GWh/year. According to an analysis report from Industrial Securities, the demand for power batteries in China was about 28GWh in 2016, and it is expected that the demand for power batteries will only be about 90GWh by 2020.

According to the market sales ratio of 1:10 for electric buses and electric passenger vehicles, the reporter estimated that the annual production capacity of 170GWh can meet the total demand of 500000 electric buses and 5 million electric passenger vehicles per year. According to the development plan of new energy vehicles in China, this is the goal after 2025. Undoubtedly, with the surge of power battery expansion in recent years, the problem of overcapacity has indeed become increasingly imminent.

In fact, there is still controversy over whether there is overcapacity in the traditional automotive industry. Some experts believe that "ineffective overcapacity, insufficient effective capacity" is the true current situation of the domestic automotive industry.

Analysts point out that currently, China's automotive industry is scattered, with over a hundred complete vehicle factories. However, most of the factories have low profitability, which leads to ineffective production capacity. At the same time, local governments blindly support enterprises to launch new projects due to their political performance impulses, further amplifying the effect of ineffective production capacity.

The above individuals pointed out that in recent years, although the concentration of China's automotive industry has increased to some extent, the low level of industry concentration has not yet been completely changed. Mergers and restructurings based on product structure adjustment are still small-scale promotion, and restructuring between large enterprises is still very rare. Moreover, mergers and acquisitions mainly occur among state-owned enterprises, and the regulatory role of market mechanisms is limited. This is mainly due to local protection of local automotive qualification resources and blind planning and expansion.

Regarding this, Jia Xinguang stated that among the top selling car companies currently, except for a few that do indeed have temporary overcapacity, other companies are facing production shortages.

He pointed out that the accurate description of China's automotive industry should be ineffective overcapacity and insufficient effective capacity. Car companies should try their best to transform in situ and increase unit output. At the same time, accelerate mergers, alliances, and restructuring between enterprises. In addition, in the assessment and approval of production capacity in relevant industries, more modern methods should be used instead of being a one size fits all approach.

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