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Car Ownership Restrictions in China’s Major Cities

China’s major cities are limiting car numbers and purchase restriction which leads to the net effect of lower demand and limited new auto sales.

This month, the State Council released a regulation legalizing the ride-hailing apps. The regulation, which takes effect on Nov 1, is part of efforts to standardize the business.

Boston Consulting Group adds that car ownership is being discouraged through restrictions on purchases and usage. The company has forecast China’s auto market to shrink 2 percent a year over the next decade, based on a 5 percent decline in individual purchases of private vehicles and a car-hailing fleet replacement rate of 3 percent.

Data from the China Association of Automobile Manufacturers show total car sales nationwide were 24.6 million last year, making it the world’s largest market.

According to Nielson Co Greater China, as ride-hailing and ride-sharing apps save people money and hassle – no purchase fee, tax, insurance or fuel costs, and no need to enter a city’s license plate lottery or auction – they have the potential to deter potential car buyers.

Xu at Boston Consulting Group says he expects individual demand in China to decline 5 percentage points a year, as the younger generation in large cities have less interest in owning a vehicle, partially due to the availability of ride-hailing services.

Liu Xiaoming, vice-minister of transportation, says he expects the State Council regulation to boost the ride-hailing sector in the long term, as it will support the development of ride-hailing platforms and encourage cars owners to provide ride-sharing services, which will ease congestion in cities and reduce air pollution.

However, the news is not all bad for auto traders. Shi Jianhua, deputy secretary-general of the China Association of Automobile Manufacturers, says a boost for ride-hailing services may lead to “a larger demand for car replacements”.

The new rules require that vehicles registered for ride-hailing are retired after 8 years, to maintain service levels.

Xu agrees that service providers will likely buy more vehicles and has forecast that the car fleet demand will add 3 percentage points in annual growth to China’s new car purchase volume.

Boston Consulting Group also expects many customers, especially those in second-tier cities and smaller townships and counties, will still choose to buy cars at the same rate as residents in larger cities, as most still see vehicles as a status symbol. – ChinaDaily

 

 

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