Geely Sounds Alarm on Car Industry Overcapacity; Rare Earth Curbs Hit Automakers

Geely founder Li Shufu cautioned that the global car industry is grappling with "serious overcapacity" and noted that Geely would refrain from expanding its manufacturing footprint.

 Li’s remarks come amid a turbulent period for the Chinese automotive industry, which is the largest in the world and currently experiencing an intense price war.

Source : Freepik

At an auto forum held in Chongqing, Geely Chairman and founder Li Shufu raised red flags over mounting production challenges in the automotive sector. He cautioned that the global car industry is grappling with "serious overcapacity" and noted that Geely would refrain from expanding its manufacturing footprint. 

According to the company, Geely has no plans to build new facilities or ramp up output at its current plants, reported Reuters. Geely Holding, the parent company, owns a diverse portfolio of automotive brands including Geely Auto, Zeekr, and Volvo.

 Li’s remarks come amid a turbulent period for the Chinese automotive industry, which is the largest in the world and currently experiencing an intense price war. The competitive landscape has driven many Chinese players to look overseas for growth opportunities. In response to these dynamics, regulators in China have urged automakers to ease back from the aggressive pricing strategies.

Several Chinese companies such as BYD, Chery Auto, and Great Wall Motor have taken steps to establish production bases in international markets. In contrast, Geely has opted for a more collaborative approach, announcing plans to partner with French carmaker Renault. Under the arrangement, Geely will utilise Renault’s existing plants in Brazil and also acquire a minority interest in Renault’s operations in the region. Although Reuters reported in April that Chinese regulators had delayed approvals for the project, Geely affirmed that the collaboration in Brazil was progressing successfully.

Rare Earth Supply Curbs Rattle Global Automotive Supply Chains

Meanwhile, automakers are facing a separate but significant challenge—tightening controls on rare earth magnet exports from China. Industry insiders reveal that several local vendors have submitted requests to the Chinese government for import clearances. However, no permissions have been granted yet. China currently holds more than 90% of global processing capacity for rare earth magnets, which are essential components in sectors ranging from electric vehicles to consumer electronics and clean energy.

New export licensing requirements for seven types of rare earth elements and related magnets took effect on April 4. The impact is already visible. In Japan, Suzuki Motor has halted production of its Swift model due to the restrictions. Last week, Maruti Suzuki India’s Senior Executive Officer (Corporate Affairs), Rahul Bharti, noted that China now requires an end-user certificate approved by both the Indian and Chinese governments. “So that process is on and industry is in discussion with the government,” he said.