CAAM official criticizes Guangzhou auto restriction policy

Gasgoo.com (Shanghai July 14) - In an official statement, China Association of Automobile Manufacturers Executive Vice Chairman and Secretary General Dong Yang criticized the government's recent decision to limit automobile sales in Guangdong's capital of Guangzhou.

As cited by a Beijing News report appearing earlier this week, Mr. Dong believes that the policy goes against the central government's overall plan to maintain stable economic growth. He believes that with negative market growth rates within acceptable levels, any further decreases may unnecessarily harm the economy. "The Guangzhou [policy] may affect the market by 0.5 to one percent," Mr. Dong said.

Mr. Dong also worries that the policy may harm sales of both new energy and own brand vehicles. "Regardless of whether an auction or a lottery [system is used], consumers will tend to purchase luxury, large and foreign joint venture models," he commented. Own brand sales in China totaled 3.15 million units in the first half of 2012, 0.2 percent less than the previous year. Own brands' combined share in the passenger automobile market over the six month period was 41.4 percent, falling three percent from the previous year. Their sales have been on the decline for the last six months.

Finally, Mr. Dong worries that the policy may also negatively affect domestic automobile production. Although he opposes the Beijing lottery system, he does point out that it was implemented after the state Council reviewed reports and solicited the advice of all subordinate departments.

Mr. Dong advocates stable production as a method to ensure economic development. "[Individual] automobile manufacturers must be responsible for their own production [volumes]… in order to ensure that there is a large enough margin for development to occur," he explains.

CAAM Deputy General Secretary Yao Jie warns that if the Guangzhou policy is mimicked by other cities, it will be severely detrimental to domestic manufacturers. "The policy in question will reduce the scope of the Guangzhou automobile market by about 200,000 vehicles," Mr. Yao predicts. "If other Chinese cities copy Guangzhou, the domestic industry will suffer a devastating blow." China Passenger Car Association Deputy Secretary General Cui Dongshu warns that up to 20 to 30 percent of Guangzhou dealerships may be forced to close due to the policy.