China has Ghost Automobile Factories

Discussion in 'China' started by Armand2REP, Jul 23, 2013.

  1. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

    Dec 17, 2009
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    First it was Ghost Malls, then Ghost Cities, then Ghost Airports, then Ghost Shipyards, now Ghost Automobile Factories

    Staff Reporter 2013-07-21

    Youngman Automobile sees low capacity utilization, despite large investment

    China Youngman Automobile Group has planned on constructing ten major production bases across the country by investing 44.44 billion yuan (US$7.24 billion). The combined capacity of all these production bases is estimated to be 1.46 million vehicles per year.

    However, the company manufactured less than 60,000 vehicles in 2012. Since the capacity of the production bases far exceeds the actual sales amount, most of the bases have been idle or production halted altogether. Some local governments, including Guizhou, Ningxia and Zhejiang, have questioned the business soundness of the project.

    "The factory has not operated at all since July," a worker at Youngman Automobile's Xiaoshan base had told a China Business News reporter.

    The employee added that the plant has mostly been half-shut so far this year.

    The construction of the Xiaoshan base began in 2008. The base spans an area of 1,500 acres, with the first investment in it pegged at 3.6 billion yuan (US$587 million). The company had projected a capacity of 150,000 vehicles a year from this base.

    It never even came close to the target.

    According to company data, Youngman Automobiles sold 50,000 of its lotus models in 2012. Of these, the L3 was manufactured at bases in Taian, Shandong and Jinan, while the L5 was produced at the Xiaoshan base.

    The capacity utilization rate was a mere 10%, since the capacity rate of the three bases is 480,000 vehicles.

    Idle capacity is not the only obstacle being faced by Youngman Automobiles.

    Since 2009, the car maker started expanding its operations rapidly as it built seven new production bases in China within four years, boosting its base count to 10.

    The construction of the Xiasha base, also located in Hangzhou, has yet to be completed after nearly four years of work.

    On visiting the site, a reporter from the business paper could only see an unused, windowless factory.

    A man in charge of construction at the base stated that the plant had been idle for over a year.

    A source familiar with the car maker's business revealed to the paper that the distribution of the company's production bases resulted in a staggering financial loss. Youngman Automobile chairman Pang Qingnian has to figure out how to overcome these difficulties, he added.

    Youngman Automobile sees low capacity utilization, despite large investment|Companies|Business|
    Keshav Murali likes this.

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