Investment

Large capital requirement set for new makers of commercial vehicles

By Han Tianyang (China Daily)
Updated: 2010-10-25 07:56

BEIJING - China's regulators have moved to set stricter rules on new commercial vehicle manufacturers next year to avoid possible overcapacity and encourage advances in the industry.

The Ministry of Industry and Information Technology released a draft regulation on Oct 18 through its website that proposes newly established commercial vehicle producers should have at least 2 billion yuan ($300 million) in capital.

The proposed rule covers trucks, buses and towing vehicles.

At least 800 million yuan of the required investment should come from the company's own funds and at least 800 million yuan should be used in production facilities, said the ministry.

The new policy would also set minimum requirements for production capacity - manufacturers of heavy-duty trucks must make at least 10,000 vehicles a year, while 50,000 mid-sized and 100,000 light trucks would be the minimum annual capacity of any new venture.

The guideline also requires production capacity of at least 5,000 units for makers of large and medium-sized buses. The threshold for light buses would be 50,000.

The new rules reflect government efforts to forestall overheated investment in commercial vehicle production and possible overcapacity, analyst said.

Eager to tap the huge potential in China's market, a growing number of domestic and Sino-foreign joint venture companies have joined the ranks of commercial vehicle makers in recent years.

Official statistics show that in the first nine months this year, production and sales of China's commercial vehicles both increased about 30 percent to more than 3.2 million vehicles.

Another intent of the new rule is to improve technological competitiveness in domestic manufacturers and accelerate modernization in the industry. Most locally built commercial vehicles now use basic technology and carry a low price, analysts said.

The ministry blueprint calls for new manufacturers to establish R&D operations costing at least 500 million yuan, with a minimum of 100 million yuan invested in instruments and equipment.

The draft regulation also includes detailed benchmarks on capabilities new companies must have to develop and make engines, transmissions and other key components.

The ministry also released draft regulations on low-speed vehicles, including three-wheeled motorized carts and low-speed trucks, that also set higher thresholds for registered capital and production capacity in new manufacturers.

China Daily