In order to cope with a city drowning in traffic, in one of the most polluted environments on earth, the Beijing authorities introduced restrictions aimed at curbing the registration of new vehicles in the city. Introduced in January 2011, the new regulations mean that only 20,000 cars can be registered in any given month, and only a total of 240,000 may be registered in the whole year.
When you consider that nearly 900,000 new cars were put on the road in 2010 this is bad news for most of the city’s auto traders.
There have been reports of dealers in near suicidal states after over stocking (often thanks to manufacturer pressure) on the forecourt and now finding themselves with massive quantities to shift without the ability to get them registered.
In the long run many of these companies will probably find they have to sell their stocks on to other dealers outside of Beijing at a loss.
In addition poorer families are expected to be hit worst by the legislation, with priority expected to be given for licensing mid to high range motors.
So is there any upside?
Well there’s the obvious boost in second hand car values and sales, because the number plate is going to be the most important factor on choosing a new ride. After all who would spend large sums of money on a vehicle that can’t even be driven on the roads without paying substantial fines?
One of the other areas that will benefit and has yet been unexplored in much of the mainstream press is the rental market.
China’s rental market has traditionally been tiny to non-existent. Owning a new car has been the key goal of almost any family and for the rich it has been possible to buy fleets of vehicles to be driven at a whim.
Sensible customers however are noting that with regulations driving prices inexorably higher in the search for that all important Beijing number plate, the rental market offers a cheap and feasible alternative.
In fact, while rental has not been terribly successful in the past it may become a surging sector in an otherwise depressed market place. It’s going to be interesting to see if the major names which have so far been deterred from entering the Chinese market because of its size are going to come running or whether it will be enterprising local firms that capitalise most on this opportunity.