Geely Auto slows expansion: New plants halted due to overcapacity and price war
Geely Auto , China's second-largest automaker, has announced it will not build new factories due to global production overcapacity , a decision that could affect the entire industry.
Chairman Li Shufu , speaking at the Chongqing Auto Show, said the company will focus on improving technological capabilities to become a key player in future mobility while avoiding further fueling overcapacity.
“The global auto industry is in crisis due to excess production capacity,” Li said in a video posted online. “That’s why we decided to stop building new plants.”
Price battle underway
The move comes amid a fierce price war in China, where giants including BYD, Geely and startup Leapmotor slashed prices on 70 models by up to 20% in late May, according to the 21st Century Business Herald. Discounts from Chinese manufacturers have more than doubled, from 8.3% in 2024 to 16.8% in April , JPMorgan Chase reported.
“As a major manufacturer of gasoline and electric cars, Geely’s decision to halt new plants will likely inspire local competitors to follow suit, leading to healthier growth in the industry,” said Chen Jinzhu, CEO of Shanghai Mingliang Auto Service. “By reducing capacity, it can also mitigate the problem of discount wars, avoiding the need to cut prices to clear large inventories.”
Geely Galaxy
Li Shufu added that Geely will leverage existing global manufacturing capacity to sustainably implement its international expansion strategy . In February, the company announced plans to use a Renault plant in Brazil to support its growth plans.
The tycoon also warned that Chinese electric vehicle (EV) makers could lose their competitive edge in terms of production capacity and costs if they fail to adequately manage the risks of overcapacity and weak sales. Geely Auto, which makes cars under brands such as Zeekr, Lynk and Galaxy, shipped 2.18 million vehicles in 2024, up 32% from 2023. Sales of EVs grew 92% to more than 888,000 units.
Li’s Zhejiang Geely Holding Group also owns Volvo Cars and a stake in Mercedes-Benz maker Daimler that is large enough to dictate its management. Hangzhou-based Geely Auto reported net profit of 8.5 billion yuan (about $1.2 billion) in 2024, up 52 percent from a year earlier.
Europe next Chinese victim
In China, electric vehicle sales accounted for more than 60% of total deliveries in 2024, according to the China Passenger Car Association. However, only half of the EV production capacity, or 20 million units, has been utilized, as reported by Goldman Sachs. The overcapacity is enormous, and the effect will be to flood the EU with low-cost Chinese electric cars.
Nick Lai, head of automotive research for Asia-Pacific at JPMorgan, noted that rising exports could improve the profitability of Chinese EV makers, thanks to higher margins abroad. In the first four months of 2025, EVs accounted for 33% of China's total vehicle exports, up from 25% in the past two years. Naturally, exporting countries will see their domestic industries hit hard.
Carlo Diego D’Andrea, president of the European Union Chamber of Commerce in Shanghai, noted growing interest in China’s EV technology and investment in Europe. “I wouldn’t be surprised if Europe were to ask for more localization of technologies,” he said. “I hope that the dialogue between Europe and China will lead to positive results, creating more jobs thanks to Chinese companies.”
D'Andrea added that European countries want Chinese manufacturers to bring their entire supply chains to the continent, rather than just partial assembly lines with imported components. Europe is not only prey, but it seems happy to be so.
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The article Geely Auto slows down expansion: New factories stopped due to overcapacity and price war comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/geely-auto-stop-stabilimenti-sovraccapacita-guerra-prezzi/ on Mon, 09 Jun 2025 09:00:54 +0000.