China's electric vehicle (EV) sector reached yet another milestone as annual production volume surpassed the 10-million-unit threshold amid mounting worries about overcapacity.
The China Association of Automobile Manufacturers, an industry consortium backed by the government, announced that the 10 millionth EV rolled off the production line on Thursday, an increase of 4.3% from the same period last year, and beating the 2023 production seven weeks before the year's end. CAAM did not name the carmaker.
While the rising production reflects China's prowess in the EV industry and domestic consumers' increasing interest in green and smart vehicles, it has also raised fears of excess capacity in the mainland's automotive sector where petrol-powered vehicles are shunned by buyers.
"As EVs outsell conventional petrol cars, more existing production facilities and workers will become redundant," said Phate Zhang, founder of Shanghai-based EV data provider CnEVPost. "Demand for petrol cars will weaken in the coming years."
The mainland has an overall manufacturing capacity of 40 million vehicles a year and sales of around 22 million units, according to Shanghai-based consultancy Automobility.
No reporting mechanism on EVs is available in China, but calculations by China Business News showed 15 EV start-ups which had either collapsed or been driven to the verge of insolvency had a combined annual production capacity of 10 million units.
In the first 10 months of 2024, 17.3 million petrol and electric cars were sold on the mainland, a marginal decline of 0.1% year on year, according to CAAM.
A total 9.75 million EVs were handed to mainland customers between January and October, up 34% from a year ago. The output of 10 million units so far this year has already beat the total production volume of 9.59 million units for the full-year in 2023 by 4.3%.
Since July, monthly sales of battery-powered cars - which comprise pure electric and plug-in hybrid vehicles - have exceeded 50% of the industry total.
Analysts have predicted that annual production and delivery of electric cars would top 12 million units this year.
"The rapid growth of EVs will come at the expense of the petrol car," said Gao Shen, an independent analyst in Shanghai. "Overcapacity woes are widespread because some car component producers also face a supply glut."
Battery manufacturers, which number close to 50, will be able to produce 4,800 gigawatt-hours (GWh) of batteries in 2025, four times the projected demand of the country's EV makers, according to a forecast by mainland online investment publication Gelonghui.
China is the world's runaway leader in the EV industry, with sales of pure electric and plug-in hybrid cars accounting for 65% of the global total in the first half of 2024, according to the China Passenger Car Association.
But the country's EV makers are facing trade barriers in the US and European Union.
Last month, the EU voted to impose an additional tariff of 17 to 35.3% on Chinese-made pure EVs following an anti-subsidy investigation.
The United States has also raised tariffs on Chinese-made EVs to 100% from 25% from September for the same reason.
China's EV sector took off in 2015 bolstered by heavy subsidies granted by Beijing to encourage electric car ownership.
The central and local governments have also offered other inducements such as free driving permits, lower parking fees and consumption tax exemptions to spur the EV industry.