China’s auto industry is plagued with overcapacity—but a new deal could show the way out
If the two competitors can pull off a merger, the implications extend well beyond Toyota. Beijing has spent years pushing the auto industry to consolidate—an increasingly urgent task as excess capacity and a bruising price war erode profitability. Yet, meaningful restructuring has proven difficult. Local governments have powerful incentives to protect the factories, jobs and tax revenue in their jurisdictions, while the big state-owned groups have little reason to surrender their turf.
