License Quota Forces Car Dealers to Shift Gears
    2011-01-14 14:02:54      Web Editor: Jiang

"Clearly it's going to have quite a major impact in the short term. But let's be aware of some of the issues here. Car emissions are considered to account for around 50 percent of the air pollution in Beijing and it is seen as a major short-term problem for the city."

"China's economy is in transition over the next decade, so we'll almost certainly see the decline of the manufacturing sector. And although car production and construction, for example, have been the pillar of the industry, we'll see a burgeoning service industry and technological innovation, so I think it's just another change in the direction of the Chinese economy."

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Related: Bumpy Road Ahead for Car Sales

               Beijing Residents Rush to Register New Cars

               Beijing Unveils Measures to Ease Traffic Congestion

               Beijing to Limit Issuance of New Car Plates

Car dealerships in Beijing may opt to shift their focus on boosting sales to neighboring cities after the municipal government imposed an annual quota on new car license plates as part of efforts to ease traffic gridlock in the capital city.

Some car dealerships, especially of domestic brands, are making plans to expand sales to areas outside Beijing where the policy restriction does not apply, the China Business Times reported.

The new limit means buyers will favor high-end and luxury types of cars once they obtain the hard-to-get licenses. Domestic brands and small cars, which sell mostly at below 100,000 yuan, will see lower sales in Beijing, the newspaper article said.

The policy stipulates that buyers of secondhand cars must go through the monthly lottery system to obtain a license and sellers of used cars will see their license annulled in a year if they make no new purchases. That puts dealers of both new and used cars to compete in the same arena for the annual 240,000 new car license plates.

The combined factors have driven many companies to stock up cars, including used cars, in preparation for the coming hike in rental businesses. Car dealerships are tapping into this market, putting types of cars idling for sale ready for renting.

The new policy to ease traffic congestion may help curb car sales in Beijing, but the number of people who need cars to commute will increase. For them, rent a car is certainly a first choice if they can't afford a car or fail to obtain a license, the newspaper quoted industry insiders as saying.

Cars were seen parked at the yard of a 4S car dealership in Beijing on January 10, 2011. [Photo: CFP]

Meanwhile, industry experts predict the big automakers will likely adapt by focusing more on smaller cities further inland, the China Daily quoted Zhong Shi, an independent analyst in Beijing as saying.

"The best and most efficient way for automakers to offset the declining sales in Beijing and maybe other first-tier cities in the near future is to shift rapidly their dealer network expansion inland," said Zhong.

Besides easing traffic jams, the new policy will help address serious air pollution problems in the Chinese capital city. Car emissions account for around 50 percent of the air pollution in Beijing, which is a major short-term problem, according to Mike Bastin, who teaches Marketing and Management at Tsinghua University and specializes in Chinese business culture.

Mike sees the new policy as another change in the direction of the Chinese economy, which will have no serious detrimental effects in the long term. "China's economy is in transition over the next decade, so we'll almost certainly see the decline of the manufacturing sector. Although car production and construction, for example have been the pillar of the industry, we'll see a burgeoning service industry and technological innovation," Mike Bastin said in an interview with China Radio International.


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