Car-industry executives around the globe have underestimated the severity of over-capacity in China's car industry, a KPMG survey found. About 37 per cent of the 120 executives surveyed believed there was no over-capacity in the mainland's car industry. Another 49 per cent of the executives - at car plants and suppliers in North America, Europe and Asia - said over-capacity was 30 per cent or less. The survey, conducted last October and November, reflected a far rosier outlook than those of KPMG and other industry analysts as well as recent comments from government officials that the industry's blistering growth was over. Xu Changming, an official at the State Information Centre, said car sales were likely to continue to slow this year and the stellar 'blow-out' growth seen early this decade probably would never return, according to Agence France-Presse. Passenger car sales were expected to rise 17 per cent year on year this year, compared with 15.2 per cent in last year and 75.3 per cent in 2003, Mr Xu said. Paul Brough, managing director of KPMG financial advisory services practice, said: 'Although we expect sales to grow in future years, over-capacity will remain a major issue for the next decade. 'Even with predicted sales of 3.1 million units in 2007, that would still mean that less than 60 per cent of capacity would be utilised,' Mr Brough said. In a recent report Merrill Lynch estimated that the industry's capacity utilisation rate had dropped from 95 per cent in 2003 to 72 per cent last year. It forecast that the rate would fall to 61 per cent this year and 54 per cent next year. Merrill Lynch also forecast that demand would increase 48.86 per cent from last year's 2.28 million units to 3.40 million units next year, while capacity would almost double from 3.19 million to 6.28 million units over the period. The under-estimation of over-capacity on the mainland was not unique, the KPMG survey found. About 75 per cent of the executives polled believed that globally over-capacity was less than 20 per cent. 'We believe that the level of over-capacity is still around the 25 per cent mark and to reduce this to 20 per cent would involve the removal of over four million units of capacity,' Mr Brough said. KPMG director of financial advisory services Thomas Stanley attributed the under-estimation to difficulty in keeping track of plant expansions and a self-centred view of the industry. 'A lot of executives think it is somebody else's problem ... most companies are confident they will succeed in the marketplace and that their capacity will be adequately utilised,' he said. Global excess capacity will make it difficult for Chinese carmakers to fill idle capacity with export orders. Other hurdles included the technical requirements of international buyers as well as the lack of distribution channels and after-market servicing and maintenance centres, analysts said. 'How soon Chinese makers will export in a significant way will vary by company, but within the next couple of years one will see a concerted effort by mainland producers to export,' Mr Stanley said. Anhui province-based carmaker Chery aimed to export up to 250,000 compact cars a year to the United States through distributor Visionary Vehicles by 2007, it said early this month. It sold fewer than 90,000 units last year, of which about 10,000 were exported. Merrill Lynch has forecast that China's car exports would be 150,000 units or less in 2007 - a mere 3 to 4 per cent of production. Mr Stanley said that worsening over-supply would result in an increase in the number of mergers and acquisitions.