With Beijing City set to issue only 20,000 license plates per month in 2011, it appears that the city’s auto market is going to be in a free fall situation in next year, and has managed to spark major sales of cars in December 2010 with last week seeing 30,000 cars sold and the week before 20,000 due to the gigantic cuts that the government is about to introduce.
With only 240,000 license plates available for the whole of 2011, Beijing is expected to have small sales next year. In comparison 2009 sales in Beijing alone reached 580,000 units, sales for 2010 are expected to be in the 850,000 area, so by limiting sales to 240,000 units per year the Beijing government are planning to compress sales by 70%.
For car dealers in Beijing, 2011 is expected to be a rough year with many expecting to close up shop as any profit will be gone in an instant. The vast majority of car dealers in China are still at the infancy stage and have not yet developed their after sales service offerings, thus the biggest source of profit is from new cars, but now that the new car market will be drying up in 2011. One alternative that is on the cards at the moment is registering cars outside of Beijing and in surrounding provinces such as Hebei and Shandong or even opening new dealerships in these areas.
China is famous for its regulation, bureaucracy and crazy amounts of red tape, but the introduction of the limit for registration plates is going to be the fastest and easiest way to kill Beijing’s auto market in the most effective way. However bad Beijing’s traffic is going to get, it is only going to get worse as the automobile is still a highly desired prize by the majority of middle class Beijing citizens, they will only register their cars in outlying cities and drive them into Beijing as they see fit. Although other second and third tier cities are already looking at Beijing’s license plate policy and we may see similar ideas introduced in other cities. The whole new car market will be affected with Chinese brands set to lose out the most but the big winners will be the second hand car market – those that already have a Beijing license plate and wish to sell their car will quickly find that they are worth quite a bit more as of January 1st 2011 when this policy goes into effect.