China Plans to Curb Auto Production Capacity image

China plans to promote new-energy vehicles in order to get rid of the old cars to reduce pollution. For this the country will increase the auto manufacturing capacity and encourage mergers in the industry.

To prevent overcapacity in the world’s largest vehicle market, China removed preferential treatment for foreign automakers on their Chinese plants. Because of slowing economy and record gasoline prices which keep consumers away from dealerships, the automobile sales in the Asian nation may be having their worst start in seven years.

“The industry can’t just pursue capacity increase for its own sake,” Li Shufu, chairman of Zhejiang Geely Holding Group Co., said in Beijing today. “We need to improve the use of existing capacity and upgrade our technology.”

The government reported lists four industries where increases in capacity should be curbed: auto, shipbuilding, cement production and steelmaking. Concerning the auto industry, deliveries of passenger autos, including sport-utility vehicles and light-goods vans, in the first two months of 2012 fell 3% from a year earlier, considered the biggest drop since 2005, when it fell 8.9%.

Last year the auto sales in China increased 2.5%, trailing growth in the States for the first time in 14 years.