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China to curb investment in new auto production capacity

China will limit auto manufacturers' investment in new production to restrain capacity and reduce the number of small and midsize companies, the Nikkei Asian Review reported Sept. 2.

At an international auto industry conference in port city Tianjin, an official from the National Development and Reform Commission said China will "strictly regulate investment to prevent excess."

The commission in July announced draft rules to regulate investment in the auto industry that are aimed at reducing additional capacity for gasoline-powered cars and promoting the growth of electric vehicles.

Car manufacturers will be allowed to add new production capacity if their factory utilization rate is higher than the industry average for the previous two years and their output of new-energy vehicles is greater than the industry average. New investments in a province with an overall utilization ratio below that of the national average for the past two years will also be limited, according to the report.

The utilization rate at many Chinese factories, particularly those of smaller auto manufacturers, is far below 80%, a rate which is viewed as the threshold for profitability.

The new rules would affect the strategies of international carmakers such as Nissan Motor Co. Ltd. and Toyota Motor Corp. that have announced plans to significantly boost production in China. Western and Japanese carmakers have been considering expansion in China after President Xi Jinping announced it will ease foreign ownership limits in the auto industry.

New auto sales in China are projected to be about 30 million units in 2018. Beijing plans to boost sales of new-energy vehicles to 2 million units by 2020 from 770,000 in 2017.