(Yicai Global) Feb. 20 -- There is no oversupply in China’s new energy vehicle market at present, according to the deputy director of the economic committee under the National Committee of the Chinese People's Political Consultative Conference.

China’s domestic NEV capacity was about 27 million units last year, and based on the NEV penetration rate of 30 percent and the capacity utilization ratio of 80 percent, some 11.2 million units are required to meet this year’s demand, Miao Yu said at a teaser event of the China EV100 Forum 2023, which will be held from March 31 to April 2. “We also need to consider the development for the years to come,” he added.

The capacity surplus cannot be avoided by using the capacity utilization rate to control market access and production qualifications to limit carmakers, Miao noted, adding that what should be contained is the capacity of fuel vehicles. The top priority should be figuring out how to digest the oversupply of fuel vehicles or how to transform fuel vehicles’ capacity into NEV capacity, he pointed out.

The most straightforward method to avoid gluts is standardizing the moves of state-owned enterprises and local governments’ industrial funds, subsidizing the investment impulse of specific departments, and preventing SOEs and local governments from becoming the largest shareholders of NEV companies, investing in them, and building factories for them, Miao said.

Instead, local governments should hand over the initiative to related firms and help provide services, such as enhancing the construction of charging piles, increasing efficiency, and building a good business environment, he added.

Officials have stronger motivations to support the development of the local carmaking industry because their performance is mainly assessed with economic growth, and the auto industry can quickly drive growth, the State Information Center, an institution affiliated with the National Development and Reform Commission, said in a report before. This caused some local governments to blindly invest in the carmaking industry, the SIC noted.

Editor: Futura Costaglione