China’s authorities roll out market-saving policies to spur car sales

Shanghai (Gasgoo)- China auto industry is calling for stronger incentives to spur domestic auto sales, which are further crippled by the COVID-19 spread after two consecutive years of downturn.

Due to the epidemic and the Spring Festival Holiday, China's Jan.-Feb. sales plunged 42% year on year to 2,238,000 units, according to the China Association of Automobile Manufacturers (CAAM). The decrease in Feb. sales reached up to 79.1%.

Since the country has brought the viral epidemic under control, automakers and dealers outside Hubei province have almost got back to normal production and operation. For automakers, they still need time to return to the level of pre-coronavirus period in output capacity, due partly to the remaining disruption in auto parts supply chain. Although dealers are no longer ghost towns, consumers' confidence is still weaker than year-ago period, especially the external severity portends that the war is still far from end.

Obviously, the foremost task for China has been shifted to economic recovery from the fight against the virus.

China's ministry-level departments have highlighted many times the issuance of the policies to boost auto consumption, which is regarded as a key to the country's overall revival of manufacturing businesses.

Wang Bin, vice-director of the China's Ministry of Commerce (MOFCOM)'s Market Operation Department, said on Feb. 20 the ministry would partner with relevant authorities to draw up and promulgate the policies to help stabilize automobile consumption, so as to mitigate the impact from coronavirus outbreak. To achieve that goal, local governments would be encouraged to take such steps as promoting NEV sales, increasing license plate quota of fuel-burning vehicles, and improving auto replacement.

“To boost auto sales, we must take the entire lifecycle into consideration, placing particular importance to production, transaction, and consumption,” Mr. Wang gave the viewpoint on Mar. 28.

On Feb. 24, China's Ministry of Industry and Information Technology (MIIT) pointed out that regions where the automobile purchase restriction policy is implemented would be encouraged to increase as appropriate the vehicle license plate quota as part of efforts to promote the spending of automobile and relevant products.

Besides, the MIIT stressed that the development of such industries as automobile, lithium ion battery and some leading manufacturing businesses would be prioritized to consolidate the competition advantage of industrial chain. Meanwhile, the government would vigorously prop up some strategic emerging industries like 5G, smart manufacturing and NEV, and energetically enhance the capacity of supporting industries including auto parts, core components and key electronic materials.

The MOFCOM, again, proposed that the commerce units of local governments should proactively promote the issuance of subsidy policies on new car purchase and automobile replacement, advance the relaxation of the restriction on pickups entering the city, facilitate the used car transaction, and carry out activities for car sales promotion, in a statement jointly issued with National Development and Reform Commission (NDRC), and National Health Commission on Mar. 19.

Under the guidance of the ministries, some local governments have rolled out substantial measures accordingly. Offering subsidies may be the most adopted one. In late Jan., the government of Foshan, a city neighboring Guangzhou, announced that it would provide incentives of RMB2,000 to 5,000 to promote the new car spending (including the vehicles befitting the China Ⅵ emission standard) and trade-in deal.

Guangzhou, the capital of southern China's Guangdong province, responded by offering NEV buyers RMB10,000 per car incentives for 10 months starting March. The consumers who replace or scrap used cars, and the local auto sales companies that purchase “China Ⅵ” new vehicles would be granted subsidy of RMB3,000 per unit.

It is noteworthy that the local subsidies on NEV purchase were annulled last year. Some Chinese municipalities are reverting to the tried-and-true method to weather the tough period.

Moreover, governments of such cities as Changsha, Zhuzhou, Xiangtan, Nanchang, Zhuhai, Chongqing, Changchun, and Ningbo have all announced the policies about subsidy offering.

The relaxation on automobile purchase restriction is another significant measure advocated by the central and local governments. Hangzhou, the populous capital city of Zhejiang province, has decided to increase 20,000 new cars of license plate quota in 2020, according to the authority that takes charge of regulating the city's vehicle population.

As the city doesn't curb the spending on NEVs, the license plates to be added are all for fossil fuel-powered vehicles.

In China, there have been eight cities—Beijing, Shanghai, Guangzhou, Shenzhen, Guiyang, Shijiazhuang, Tianjin, Hangzhou, and one province, capping the car license plate quota. Of them, Guiyang took the lead in removing the limit in last September. Guangzhou and Shenzhen stated last year they would increase by 100,000 and 40,000 units of new car license plates per year respectively in 2019 and 2020.