Guangzhou City, the capital of Guangdong province, becomes a car park every day at rush hour with cars stacked up bumper to bumper for miles until around 9:30am or 7pm at night, taxi drivers complain about their reduced salaries and increased waiting times. Currently Guangzhou adds 31,000 cars per month to its roads, or roughly 1000 units per day, obviously this is increasing the pressure on Guangzhou’s inner city roads and drastic measures have to be taken, the city has now decided that it will limit car registrations to just 120,000 units per year from July 1st.

The shock move was announced yesterday without warning, when the Beijing Municipal Government introduced its own license limitation policy in late 2010 it gave its citizens 30 days official warning but there was several months of rumor prior to the new rule that gave buyers plenty of opportunity to buy their new wheels. Although the new rule was announced at 9pm on June 30th, car dealers in the Guangzhou area heard of the news by 5pm and rushed to call their potential clients, clients came in their droves to buy up cars – in cash – ahead of the new rule, car dealers quoted by major Chinese automotive news outlets claimed that in the four hours from 5pm to 9pm their sales exceeded their monthly quotas. The new limit will see just 120,000 car license plates issued for the rest of the year, or a limit of 300 units per day, over the course of 2011 Guangzhou saw 330,000 cars sold in the city limits which accounts for a small but significant proportion of the Chinese car market.

The potential implications of the restrictions are clear in the short term, less cars on the road and less sales for dealers, but the long term implications could potentially mean that other cities will follow in Guangzhou’s footsteps and introduce their own license plate restrictions. Beijing currently limits license plate registrations to 240,000 units per year or 20,000 per month via a lottery system, Shanghai auctions its plates (which have breached the 60,000RMB barrier) and the sleepy provincial capital of Guizhou province, Guiyang, introduced its own license plate restrictions with only 2000 plates being issued each month. Should other cities follow suit, we can expect to see the Chinese car market fall considerably in the next few years.

Ash

Ash came to China at 18 on a whim and never left. Some 10 years later he collected a degree and a family along the way and now focuses his time on watching the Chinese car industry develop. He has witnessed the market change from being minor backyard market in to the world’s biggest and most important market for all car manufacturers. You can contact or connect with him via Linkedin by clicking the ‘Website’ link.

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