Beijing to Restrict Car Usage, Chinese Automakers Anticipate Market Downturn

Beijing is a city in crisis. It is, more or less, a microcosm of the world at large: smog and traffic congestion are choking China’s capital. This year, 4.7 million cars were sold in Beijing alone; nearly twice the number sold just five years ago. Despite a new subway system, the roads remain gridlocked, and the Beijing municipal government has had enough. From 2011, radical changes will be introduced to the city’s traffic and vehicle registration laws to make it the city that bit more livable.

This year, roughly 720,000 new vehicle registrations were issued for microvans and cars. In 2011, this number will be slashed to a third. Only registered Beijing residents will be able to purchase a license, and only Beijing registered vehicles will be allowed in the city during rush hour. Parking fees are also set to increase.

China’s largest city, Shanghai, has had something similar in place for the past ten years, though analysts never expected Beijing to do the same. Beijing’s municipal government has always insisted it would not implement such a system. Now, analysts fear the repercussions for China’s burgeoning auto industry. So says Yale Zhang, an independent auto analyst:

“Auto makers may have to adjust their production and sales plans next year. The move by Beijing will basically cost auto makers half a million new car sales next year. But Beijing as the capital city can become an example for other cities in the future.”

As you would expect, China’s automakers are less than happy about the planned restrictions. Chery spokesman Jin Yibo expresses this growing sentiment:

“Definitely this will impact our sales in Beijing next year, But it's hard to say what percentage will be affected specifically. In fact, what worries me more is that other cities will follow Beijing's lead to issue such regulations, and that will have a bigger impact.”

Other cities, including the eastern provinces of Jiangsu and Zhejiang are considering similarly restrictive measures, such as requiring residents to purchase a dedicated parking space before buying a car.

The news comes just as analysts are predicting a downturn in China’s auto sales, with growth slowing to 10% in 2011 down from 30% this year and 50% in 2009. The cause lies not only in new restrictions such as those being implemented in Beijing, but also in an anticipated increase in the vehicle ownership tax and the discontinuation of government subsidies on small, fuel efficient cars.

Only time will tell whether these restrictions will help Beijing in the long term.

By Tristan Hankins

Via: WSJ