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Invalid production capacity of 147 car companies was withdrawn
From January 24th to February 10th, the National Development and Reform Commission (NDRC) released a list of World Manufacturer Identification (WMI) codes assigned to various vehicle manufacturers. This list includes 147 companies in total. Among them, 124 companies that produce complete vehicles, modified vehicles, or special vehicles have been permanently disqualified from manufacturing. Additionally, 21 companies hold multiple WMI codes, some of which will be revoked. Two more companies had their WMI approvals for certain vehicle types canceled.
This move is expected to significantly increase industrial concentration within the auto sector. The WMI, which forms the first three characters of a 17-digit Vehicle Identification Number (VIN), serves as a unique identifier for vehicles, ensuring that no two vehicles share the same code within a 30-year period. It's often referred to as the "car ID card." However, it's important to note that the WMI does not reflect corporate ownership. For example, even though SAIC Motor has acquired Ssangyong Motors, its WMI still reflects its Korean origins. Every automaker worldwide holds at least one WMI to certify the production of their vehicles. Therefore, the approval and revocation of WMI codes are closely tied to a company’s eligibility to manufacture cars.
The NDRC’s initiative aims to clean up the auto industry by eliminating inefficient production capacity and addressing overcapacity issues. Removing unproductive players is just the first step. The next phase involves a thorough evaluation of existing production capabilities, followed by a series of policy measures to strengthen macro-control. These include improving industry planning, enforcing strict market access rules, controlling new projects, promoting technological upgrades, accelerating mergers and acquisitions, supporting top-performing enterprises, and ultimately increasing industry concentration.
This regulatory action could also impact industry profits, which have only recently started to recover this year. According to data from the Ministry of Commerce, the automotive industry began reversing its downward trend in the second half of last year, largely due to increased production and sales volumes compensating for losses from price cuts and rising costs. However, with tighter control on production capacity, the uncertainty for private investors entering the sector has increased.
Many private companies have attempted to find workarounds, such as forming joint ventures with qualified manufacturers, setting up branch factories, or partnering with state-owned auto companies to gain access to the industry. The new auto policy explicitly prohibits the buying or selling of shell resources, forcing these companies to seek alternative routes to enter the market.
Overall, this regulatory shift signals a broader push toward a more structured and efficient automotive industry in China.