Less restriction hoped to stimulate growth in car sales

The Ministry of Industry and Information Technology is calling for cities in China that have introduced restrictions on the number of license plates allocated to citizens to increase their allowances in a bid to boost car sales in the world's largest vehicle market.

In a document released on Tuesday, the ministry said it will "actively stabilize vehicle consumption and encourage cities that limit car sales to increase appropriate quotas to promote sales of vehicles and relevant products".

The document came as China's vehicle sales have fallen for two years in 2018 and 2019 and are expected to maintain a downward trajectory in 2020.

The previous estimate of a 2 percent dip by industry organizations may worsen due to the ongoing coronavirus outbreak that has extended plant closures and kept visitors from showrooms.

Sales in the first two weeks of February fell 92 percent from the same period last year, according to the China Passenger Car Association. It expected a 70 percent fall in February.

Cui Dongshu, secretary-general of the association, predicted sales in 2020 would see a 5 percent fall year-on-year.

Another industry organization, the China Association of Automobile Manufacturers, had the same estimate. Its executive vice-president Fu Bingfeng told Reuters that the fall could reach 10 percent in the first half of the year.

Under such circumstances, easing purchase restrictions, usually in cities where people have strong purchasing power, could help change the situation, Cui said.

There are six mega cities and one province that have put in place measures to limit vehicle sales: Shanghai, Beijing, Tianjin, Hangzhou in Zhejiang province, Guangzhou and Shenzhen in Guangdong province, and Hainan province.

Most of these cities limit the annual quota to around 100,000, leaving a growing number of people wanting cars unable to buy them.

In Beijing, for example, as of the end of February, there were over 3.3 million people participating in the city's lottery draw system to win a gasoline vehicle license plate.

In the same month, more than 400,000 applicants queued to get plates for electric vehicles which are handed out on a first-come-first-served basis.

At the current rate, it would take around 9 years for all of them all to get number plates.

"Increasing the quota in Beijing is crucial to boosting car sales in 2020," Cui said. He said the original intention of the measures that cities introduced were to alleviate traffic congestion, but there are now other measures that can achieve similar, if not better, results.

For example, local authorities can levy road charges and use smart infrastructure to optimize the potential of the current road network, he said.

Shi Jianhua, a deputy secretary-general of the China Association of Automobile Manufacturers, has repeatedly called for the authorities to leave the market to the market and cancel restrictive measures to create a healthy auto industry.

Late last month, the Ministry of Commerce called for similar measures to stabilize vehicle sales.

"We encourage local authorities to stimulate sales of new energy vehicles, offer a larger quota of license plates and favorable tradein policies," said Wang Bin, a senior official in charge of consumption.

Before the ministries aired their opinions, local authorities in Foshan, Guangdong province, introduced their latest incentive. Starting March 1, local residents that place orders for vehicles can receive a subsidy of up to 5,000 yuan ($711.7).

Soon after, the Guangdong provincial government issued a statement calling on the cities of Guangzhou and Shenzhen to ease their license plate quotas.

On Thursday, the Guangzhou government said it will offer subsidies for new energy vehicles and trade-in vehicles as part of a 48-article document to boost overall consumption in the city.

Other cities in the country are yet to follow suit so far.

Both officials and analysts said there is still plenty of room for growth in China's auto market in the long run and demand is robust. Vehicle sales will rebound as people's lives returns to normal when the epidemic is controlled, Wang said.

lifusheng@chinadaily.com.cn