How to Build a New EV Factory in China

China’s automotive industry is grappling with a growing overcapacity problem as the nation accelerates its transition to electric vehicles.

Despite building out more than 20 million units of annual production capacity for new energy vehicles (NEVs), the phaseout of traditional ICE vehicles has barely kept pace.

Estimates suggest that only 2 to 3 million units of ICE vehicle capacity have been offset through this shift.

Meanwhile, legacy ICE vehicle manufacturing still holds over 30 million units of production capacity.

Rather than repurposing existing facilities, much of the new EV capacity has come from newly constructed plants.

As a result, the sector is facing a dual challenge: idled capacity on one side and relentless expansion on the other.

In my opinion, mismatch between production and demand risks straining already tight resources, leading to inefficiencies and waste.

The rapid buildup of capacity, without corresponding market absorption, underscores the structural tensions in the world’s largest auto market.