From Longman Business Dictionary
overcapacityo·ver·ca·pa·ci·ty /ˌəʊvəkəˈpæsətiˌoʊvər-/ noun [uncountableU] MANUFACTURING when there are more factories, buildings etc that are able to produce a particular product or service than there is demand for itThe banks are hurt by the industry’s overcapacity, and fear that there will be too many banks chasing too few customers.
→ compare spare capacity under capacity