Local governments step up with incentives to spur sales
Measures include subsidies for buyers and cutbacks on license plate restrictions
Local authorities in a growing number of Chinese cities are offering subsidies and increasing the number of available license plates to encourage vehicle purchases in the country.
Residents in Ningbo, a city in East China’s Zhejiang province, can have a discount of 5,000 yuan if they buy a locally produced vehicle by Sept 30, the city government said on Friday.
Two days earlier, the Hangzhou government in the same province decided to offer another 20,000 license plates this year. Hangzhou is one of several metropolises in the country that limits the number of license plates.
By Friday, at least eight cities in Zhejiang, Guangdong, Hunan and Jiangxi provinces had released measures, which are primarily centered on offering financial incentives. The Beijing government is reportedly considering moves as well.
“Cities including Hangzhou have relaxed the limits, and the moves will help boost vehicle sales,” said Xian Guoyi, a senior official at the Ministry of Commerce.
Xian made his remarks during a press conference on Thursday. He said the ministry will encourage more local governments to come up with measures considering actual conditions.
“Cars are one of the most important pillars of the economy,” said Xian.
The ministry, together with China’s top economic planner and other departments, has issued repeated calls for local authorities to help salvage the auto industry, which was hammered during the epidemic.
In February, carmakers delivered 310,000 vehicles, down almost 80 percent year-on-year, according to the China Association of Automobile Manufacturers.
In the first two months of 2020, vehicle sales totaled 2.24 million in the country, down 42 percent yearon-year.
To make it worse, vehicle sales in China fell for two years in 2018 and 2019 before plummeting in the first two months of this year.
But as the epidemic is basically curbed in China, visitors are returning to car showrooms and sales are showing signs of recovery. By March 24, over 90 percent of dealerships had resumed operations, according to the All-China Federation of Industry and Commerce.
Statistics from the China Passenger Car Association show that on an average of 16,666 passenger cars were sold daily in the first week of March, and the figure rose to 21,696 in the second week.
That was lower than in the same period in 2019, but much better than in February’s daily average of 7,099, when the epidemic was in full swing.
Carmakers do not expect sales to return to the same level anytime soon. Volkswagen Group China CEO Stephan Wollenstein expects the epidemic’s fallout to continue through the spring.
Analysts say the authorities need to give a helping hand to spur vehicle sales.
Thomas Fang, a partner of consulting firm Roland Berger’s China office, estimated that sales of passenger car brands in the country could fall to 5 percent to 8 percent this year.
“It could be even worse if the government does not come up with appropriate measures,” Fang said.
Shanghai-based consulting firm Automotive Foresight expected the market to fall by at least 15 percent from last year.
Fang said favorable policies will help the market, but added that local authorities need to weigh different things in formulating incentives.
For instance, residents in larger cities are more likely to have higher disposable income than people in smaller cities, but officials also should realize that the measures will aggravate traffic jams, Fang said.
Cui Dongshu, secretary-general of the China Passenger Car Association, warns that local governments should heed to prevent the trend of protectionism.
Cities including Ningbo in Zhejiang province and Foshan in Guangdong province are offering subsidies that valid only for buying vehicles made there.
Some analysts say that increasing license plate quotas as well as measures to facilitate car use may have a better result than subsidies that account for a 3 or 5 percent discount of a Ford Focus or a Volkswagen Golf’s sticker price.
After all, those who live in tier-one or two cities are more concerned about if they are allowed to buy a car and whether they can drive it every day, they said.
Cities including Hangzhou have relaxed the limits, and the moves will help boost vehicle sales.” Xian Guoyi, a senior official at the Ministry of Commerce