China★ Expanding Vehicle Restrictions: What Impact Will They Have?

More Chinese cities are implementing vehicle registration caps and traffic restrictions. This comes amid worsening air pollution and traffic congestion. Following four cities already taking measures (Shanghai, Beijing, Guiyang in Guizhou Province, and Guangzhou), Tianjin introduced vehicle purchase restrictions last December. Shenzhen and Hangzhou in Zhejiang Province are also reportedly seriously considering restrictions, which could impact the market, particularly for local automakers. This was reported by Securities Times, Shanghai Securities News, China News Network, and others.

According to a Guotai Junan Securities survey, Tianjin's 2012 vehicle sales totaled approximately 300,000 units, accounting for 2% of China's total. The impact of this purchase restriction on the market is not expected to be significant. The firm forecasts the city's restriction will affect only 0.6% of the national auto market. Meanwhile, Beijing introduced license plate registration restrictions starting in 2011. Before the restrictions, annual vehicle sales were around 900,000 units, but three years after implementation in 2013, sales had dropped to approximately 600,000 units.

As of July 2013, the China Association of Automobile Manufacturers (CAAM) revealed that at least six cities—including Shenzhen, Hangzhou (Zhejiang Province), Shijiazhuang (Hebei Province), Chongqing, Qingdao (Shandong Province), and Wuhan (Hubei Province)—were considering purchase restriction policies. These cities are all major markets with annual automobile sales volumes of 200,000 to 300,000 units.
According to the association, since restrictions were implemented in Shanghai, Beijing, and Guangzhou, the sales share of local brands has fallen by nearly 50% in almost all cities, shrinking to around 10%. This is significantly below the national average of 32%, indicating the most severe impact. In Beijing, sales by 12 domestic manufacturers including Chery Automobile, Geely Automobile, and BYD totaled 41,000 units in 2011, a sharp drop from 118,000 units in 2010. Their market share fell from 19.8% in 2010 to 10% in the first half of 2012.
Furthermore, the average selling price per vehicle rose by 88% before and after the introduction of the restrictions. The share of sedans with an engine displacement of 1600cc or less fell to 17%, while premium models developed through joint ventures with major overseas manufacturers relatively increased their market share.

Vehicle restrictions in major cities are also seen as boosting eco-car adoption. Beijing announced new detailed rules in November 2013 to regulate vehicle registrations, capping the cumulative number of new passenger car license plates issued over the four-year period from 2013 to 2017 at 600,000 units. Simultaneously, it set a numerical target to promote 170,000 eco-cars by 2017. The market also anticipates new subsidies for eco-friendly vehicles, such as hybrid vehicles (HVs), may be announced soon.
In December 2013, Shanghai announced plans to increase the number of eco-friendly vehicles owned by individuals within the city, such as electric vehicles and plug-in hybrids, to 20,000 by 2015. This indicates a policy of curbing gasoline vehicle purchases while increasing eco-friendly vehicles.

In response to these developments, Toyota announced in November 2013 a plan to collaborate with the R&D divisions of FAW Group and GAC Group to jointly develop hybrid vehicle systems in Changshu City, Jiangsu Province.