Car sales crash in Beijing after new restrictions on purchase

The holiday season on the New Year eve, regarded as the busiest for car dealers in the Capital turned to be a damp squib as most of them mulled plans to either shut down their business in view of drastic fall in sales.

Wang Yang, a salesperson at the Beijing Qingyang FAW (First Automobile Works)-Volkswagen 4S shop in Fengtai District said that in just under two weeks before new rules came out, his dealership sold as many cars as it normally does in a month. But the numbers took a major hit over the weekend, and sales aren't expected to rise anytime soon.

"Our customers decreased by 80 per cent compared with usual times," Wang told state run 'Global Times'.

The new regulations, announced Thursday after a series of citywide debates on how to fight the capital's traffic gridlock, include restricting the licensing of new vehicles to just 240,000 in 2011, increasing parking charges and expanding public transportation.

In 2010, more than seven lakh new cars were sold in Beijing, bringing the city's total number of cars to more than 4.7 million. More than 20,000 cars were sold on Thursday, the day the restrictions were announced as people rushed to buy cars before the new rules came into affect.

From now prospective buyers including foreigners have to take part in bidding during which 2.40 lakh new number plates would be auctioned.

The new rules came under heavy criticism locally and on the same day the Vice Mayor of Beijing city, Huang Wei, has resigned from his post and shunted to work in restive Xinjiang province which has witnessed deadly riots between Muslim Uighurs and Chinese Hans last year.

Despite being touted as the toughest congestion-tackling measure in history, new regulations are a far cry from what the general public sees as the best way to ease traffic, 'Global Times' said quoting several people in its report.

Zhong Shi, a senior auto market analyst, told the daily that the new rules shed little light on Beijing's urban planning, which he called the root of the problem. "Beijing's traffic problems were the legacy of the past, beginning with the unscientific city structure," he said.

"By separating residential districts from business districts, we artificially divided the city's functions, therefore the long distances between people's workplaces and their houses and shopping malls resulted in heavy traffic," he said.

Song Guohua, a professor specialising in urban planning at Beijing Jiaotong University, echoed Zhong's opinion, adding that the Beijing government encouraged people to buy cars before building more parking areas and roads.

"Unfortunately, this mistake is being replicated in many other cities in China right now," he said.

An official from the Beijing Municipal Council said that Beijing's roads take up only 13 per cent of the city's area - a minimal amount compared with the 33 per cent proportion seen in some major cities overseas.

"The large number of official cars is also a problem," the official said. "Although the Beijing government pledged to freeze the increase of official cars in the next five years, it has no say in the number of vehicles purchased by state organs."

Although there are many issues the new regulations fail to address, one point seems certain - 2011 will be a tough year for car dealers.

Zhong noted that Beijing already has China's largest auto market, regarded by manufacturers as a gold mine.

"The licensing restrictions blew up the gold mine, and manufacturers are now more worried that other cities will follow Beijing in enacting similar policies," he said.

Yang said the new rules could alleviate the increase of cars by inhibiting consumption, but the government has a lot of work to do to improve the city's public transportation and upgrade its infrastructure.

Du Fangci, assistant general secretary of the China Association of Automobile Manufacturers said that restrictions on car purchases will definitely make manufacturers reduce their productions, and the country's auto industry will be hurt if more cities follow in Beijing's steps.

"Low-and medium-end cars will bear the brunt of the impact as consumers find it harder to get a plate for a car," Du said.

He warned that the new rules may also hinder the technological development of the country's auto industry if producers turn to rural markets, where low-end cars are the main focus.