Shijiazhuang Shuanghuan Automobile Co displays its pure electric car at an exhibition in 2010. The Ministry of Industry and Information Technology recently stripped 13 passenger vehicle makers, including Shuanghuan Auto, of their production qualifications in an aim to overhaul the auto industry. (Photo/China Daily)
China's recent revocation of some passenger vehicle makers' production qualifications is its latest effort to invigorate its automaking industry, said government officials and industry insiders.
The Ministry of Industry and Information Technology released on its website on Feb 29 a list of 13 makers of passenger cars that have been banned from production because they did not apply for or failed to pass mandatory evaluations for two consecutive years.
Some of them were once famous in China, including Shuanghuan Auto. Based in Hebei province, the automaker was sued for copying the designs of international brands. The 13 carmakers have all long stopped production or gone defunct, according to Chinese reports.
The cleanup of "zombie" automakers, which began in earnest after the MIIT's suspension of 14 automakers' qualifications in November, is one of many steps the central government has taken to overhaul the auto industry.
Carmakers in China, most of them State-owned, were meant to hold lifelong qualifications, a hangover from the country's once planned economic system, before the ministry released plans in July 2012 to establish a system that removes those who cease production and allows new companies to join the sector.
The move encourages troubled companies to undergo upgrades or seek mergers, said MIIT Minister Miao Wei at a news conference in November.
"We have been the largest car-producing country and the largest car market for several years but our auto industry is far from strong."
Wang Liusheng, an auto analyst at China Merchants Securities, said the revocations will improve the sector as inefficiencies are removed. He added that removing outdated, excessive capacity is part of China's reforms to cut down on oversupply.
Zhang Zhiyong, a Beijing-based independent auto analyst, believes the move will facilitate mergers and acquisitions within the country.
"Some of those automakers once asked exorbitant prices because they held qualifications. It will not happen again now that their qualifications are revoked. In a sense, their withdrawal is helpful to the rational use of resources and growth of Chinese brands."
Experts believe that what is equally important, if not more important, is to allow new members to join the sector.
"If the government does not open the door for new forces to come in, it is hopeless that China will have a strong auto industry," said Fu Yuwu, president of the Society of Automotive Engineers of China at a recent forum held by ifeng.com on building a powerful auto industry.
In recent years, China has not granted any new carmaking qualifications.
"I would like to quote Liu Shijin, former vice-director of the Development Research Center of the State Council, who said that 'the history of applying for qualifications is a history of tears'," said Fu.
But things are changing for the better. Scores of companies have filed applications to produce new-energy vehicles and evaluations are underway, said the MIIT. The Chinese government has been encouraging the development of new-energy vehicles.
Although companies including Wanxiang, one of China's major spare parts producers, have reportedly obtained its qualifications, many more newcomers are calling for an easier entry into the sector, which now demands among other things an investment of at least 2 billion yuan ($306.2 million), an independent research and development center as well as sales and after-sales networks.
"If we can meet the nation's criteria about research and development and there are brands that will produce cars for us, I think the government should grant us qualifications," said William Li, founder of NEXTEV.
An industrial cleanup
Thirteen producers of passenger cars had their production qualifications revoked, according to the Ministry of Industry and Information Technology on its website on Feb 29.
Shijiazhuang Zhongbo Automobile Co Ltd
Gaobeidian Zhongke Huabei Automobile Co Ltd
Qinhuangdao Jincheng Automobile Manufacture Co Ltd
Shijiazhuang Shuanghuan Automobile Co Ltd
Jiangsu Zilang Automobile Group Co Ltd
Anhui Huayang Automobile Manufacture Co Ltd
Anhui JAC Anchi Automobile Co Ltd
Anhui Zongshen Tongbao Automobile Manufacture Co Ltd
Jiangxi JMC Special Vehicle Co Ltd
Zhuhai Maoda Automobile Industry Co Ltd
Dongguan Zhongqi Hongyuan Automobile Co Ltd
Qingyuan Yuejiang Micro Car Co Ltd
Qingling Automobile Group Co Ltd