Government policies that prioritize production targets over market demand have led to overinvestment by carmakers. The resulting glut of vehicles has created lose-lose transactions throughout the sales chain, and spawned a variety of unusual practices.
They’re feeding each other, reinforcing each other, and that could trap the market in a vicious cycle.
These unusual practices are symptoms of a vastly oversupplied market – and point to a potential shakeout mirroring turmoil in China’s property market and solar industry, according to many industry figures and analysts. They stem from government policies that prioritize boosting sales and market share – in service of larger goals for employment and economic growth – over profitability and sustainable competition. Local governments offer cheap land and subsidies to automakers in exchange for production and tax-revenue commitments, multiplying overcapacity across the country.
