China’s Geely to stop building new car plants amid severe global overcapacity: Li Shufu

Billionaire chairman says mainland China's second-largest carmaker will focus on improving technological capabilities

Geely Auto , the mainland's second-largest carmaker, will not build new plants amid excess capacity worldwide, a move that is likely to ripple across the sector as most Chinese companies are finding it difficult to make profits.

Chairman Li Shufu told the Chongqing Auto Show over the weekend that the company would avoid building excess capacity and instead focus on improving its technological capabilities to become a key player in the future of mobility.

"The global automotive industry is mired in severe overcapacity woes, [so] we have decided to stop building new car plants," he said in a video clip posted online.

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His comments came as carmakers were mired in a brutal price war on the mainland. Leading players such as BYD , Geely and start-up Leapmotor slashed prices of 70 models by as much as 20 per cent in the last week of May to retain market share, according to the 21st Century Business Herald newspaper.

Chinese carmakers' discounts more than doubled to a record 16.8 per cent in April from 8.3 per cent in 2024, according to a JPMorgan Chase report in May.

"As one of the country's top petrol and electric carmakers, Geely's decision to halt new plant building will by all means inspire its local rivals to undertake similar moves to ensure healthy growth of the automotive sector," said Chen Jinzhu, CEO of Shanghai Mingliang Auto Service, a consultancy. "By reducing capacity, the problem arising from a brutal discount war can also be addressed as companies do not have to slash prices of their vehicles to clear big inventories."

Geely's Li added that excess capacity around the world could be utilised as the company implemented its globalisation strategy in a friendly manner. In February, Geely said it was planning to use French carmaker Renault's plant in Brazil to support its expansion plans.

The billionaire also cautioned that Chinese electric vehicle (EV) makers could lose their advantage in manufacturing capabilities and production costs if risks arising from excess capacity and lacklustre sales were not managed properly.

Geely Auto, which builds cars under brands including Zeekr , Lynk and Galaxy, delivered 2.18 million cars last year, an increase of 32 per cent from 2023. Its EV sales jumped 92 per cent year on year to more than 888,000 units.

The company's parent, Zhejiang Geely Holding Group, controlled by Li, also owns Volvo Cars and a stake in Mercedes-Benz maker Daimler.

Geely Auto, based in Hangzhou, capital of east China's Zhejiang province, reported an underlying net profit of 8.5 billion yuan (US$1.2 billion) in 2024, an increase of 52 per cent from a year earlier.

EV sales in China accounted for more than 60 per cent of the total deliveries in 2024, according to the China Passenger Car Association.

Only half of the nation's EV production capacity, or 20 million units, was put to use in 2024, according to Goldman Sachs.

Nick Lai, the Asia-Pacific head of auto research at JPMorgan, said an increase in exports could help shore up Chinese EV makers' profitability as their cars enjoy bigger margins overseas.

In the first four months of 2025, EVs accounted for 33 per cent of the country's total vehicle exports, compared with about 25 per cent in the previous two years, according to Lai.

Carlo Diego D'Andrea, chairman of the European Union Chamber of Commerce's Shanghai chapter, said demand for Chinese EV technology and investments in Europe was increasing.

"I will not be surprised if Europe requests more localisation of their technologies," he told a media briefing in Shanghai last week. "I hope the [ongoing] dialogue between Europe and China will bring better results and lead to more jobs by Chinese companies."

He added that European countries wanted Chinese carmakers to bring the entire supply chain to the continent, rather than establishing knock-down assembly lines, where key components are produced at home and shipped overseas.

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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.

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