In China, car buyers in a backup

GUANGZHOU, China — Li Bo, a 28-year-old lawyer, was one of three friends who put down deposits of 50,000 renminbi, or $7,500, in May at a car dealership to each buy a popular model, the Audi Q5, which sells for the equivalent of $72,000, including taxes, in China.

Mr. Li and one friend are still waiting for their cars; the other paid an additional 38,000 renminbi, or $5,700, to the dealership and got his Q5 within a week, Mr. Li said.

“We’re very upset,” Mr. Li said. “There are just too many people ordering.”

One of the uncertainties in the auto industry lies in how much longer Chinese authorities will allow the country’s remarkable sales boom to go on and whether China will export a flood of cars if the authorities do clamp down.

Automakers have been struggling for years to keep up with demand in China, as sales have climbed at a pace never seen in a major auto market. The number of cars and light trucks sold in China was one-tenth of that in the United States in 2000. This year, sales in China have been more than 50 percent higher than in the depressed American market.

The result has been traffic jams in the largest Chinese cities, particularly Beijing. And that has elicited an unexpectedly strong response from policy makers.

The Beijing municipal authorities announced last week that they would cap the number of new car registrations at 240,000 a year, just a third of the sales pace this year.

The finance ministry announced separately this week that on Saturday it would restore the sales tax on cars with small-displacement engines to 10 percent, its level before the global downturn. (The tax had been 5 percent in 2009 and 7.5 percent this year; through the downturn, the tax has remained as high as 40 percent for sport utility vehicles and sports cars with the most powerful engines.)

Auto executives and industry analysts say that the market will continue to expand in 2011. But they forecast that the growth rate is likely to fall to 10 percent after averaging 25 percent a year for the last decade.

Slower growth is not all bad for the auto industry. Automakers have been running their factories almost around the clock, paying costly overtime and deferring maintenance. Sudden spurts in sales, like an increase of 34 percent this year, have made it hard for manufacturers to plan how many factories they should build and how quickly.

“Stable growth is much better for us,” Toshiyuki Shiga, the chief operating officer of Nissan, said at a news conference at the Guangzhou auto show, which closed on Monday.

The biggest question in the car industry is whether more cities will follow Beijing’s example and impose restrictions on car registrations. Shanghai has restricted registrations for many years to prevent its ancient streets from becoming overwhelmed. As a result, it has one-third as many registered vehicles as Beijing, even though the populations of the two cities are similar.

That leaves Guangzhou, the sprawling commercial hub of southeastern China, as potentially the country’s largest single market in the coming year. With Toyota, Honda and Nissan all operating joint ventures in the city, Guangzhou has nearly caught up with Shanghai as the largest car manufacturing hub in China.

Gridlock is not yet a crippling problem in Guangzhou, or in many smaller cities across the country. City leaders are leery of discouraging car sales.

“At the current time, Guangzhou does not have plans to follow Beijing’s new limit on the issuance of car license plates in 2011,” said Chen Haotian, a vice director of the city’s powerful Development and Reform Commission. “Our city has a very good subway system, which should help to alleviate big traffic jams.”

Guangzhou had severe traffic jams a decade ago, but moved more quickly than Beijing to build a subway network that opens 30 kilometers, or 20 miles, of new lines each year. Traffic flows more smoothly in the city than in Beijing, although Guangzhou still had to impose restrictions on who could drive, based on license plate numbers, during the Asian Games, which just ended.

Beijing represents a little less than 5 percent of the Chinese car market. While sales in Beijing looked as if they would plummet next year, growth in Guangzhou and smaller cities should make it possible for the Chinese car market to continue expanding, analysts said.

“China will still achieve 8 to 10 percent growth in 2011 because most of the incremental car sales are coming from second- and third-tier cities where traffic congestion is not yet a major concern,” said Michael Dunne, an independent automotive analyst specializing in China.

General Motors executives are also forecasting 10 percent growth over all next year in China. They contend that people across China want to be able to go where they want, when they want, without being confined to public transportation schedules.

“There’s strong, latent demand for mobility,” said Kevin E. Wale, the president of G.M.’s China operations. “The last few years have been phenomenal years for growth.”

Slower growth in auto sales could also lead the fast-growing Chinese automotive industry to outrun demand. Many experts, and even some government officials, predict that trade tensions will swiftly accompany the eventual emergence of overcapacity in the auto industry.

One worry is that China may start discriminating in favor of domestic automakers and against joint ventures that are producing cars with international brands. China already limits foreign automakers to 50 percent stakes in manufacturing joint ventures.

“If regulatory restrictions on car registrations become widespread, it may tempt the Chinese to game domestic auto sales as they have renewable energy,” another sector in which China has adopted domestic content rules and other restrictions on multinationals, said Paul Bledsoe, a former Clinton White House climate official who is now a senior adviser at the Bipartisan Policy Center, a research group in Washington.

There are some signs that China may accept that trade tensions are inevitable. Chen Lin, a commerce ministry official, said in a speech at a conference in September — before China began clamping down on domestic car sales — that the Chinese car industry would have overcapacity by 2015 and would need to develop large-volume exports by then.

“We think trade frictions are a very natural thing, as long as we are determined to go global,” he said. “Trade friction is unavoidable, given the future.”