Analysis: Problems associated with increasing automobile sales in China

Gasgoo.com (Shanghai) - The rapid pace with which the automotive market in China has developed has allowed many in the country to enjoy the convenience and pleasure of owning and driving their own personal automobile. However, that is not to say the majority of the country has access to their own car. Following increasing rates of congestion and worsening air pollution, several major cities in China have implemented policies aimed at curbing automobile sales. Looking at the future of the market, it is becoming harder and harder to maintain an optimistic attitude.

China currently has a population of 1.3 billion people. However, only one-third of the country is habitable. Furthermore, over 55 percent of the country's natural resources are being used, with that amount continuing to increase. Despite the enormous demand for automobiles in the country, prospective buyers have had to face the reality of limited resources, which has prevented many from purchasing the car of their dreams.

In order to better understand the future direction of the Chinese automobile market, Gasgoo.com (Chinese) conducted a weeklong survey, inviting 1,609 experts from across the industry to give their opinions.

In the first question of the survey, participants were asked what they felt the most severe consequence would be if the number of vehicles on China's roads reaches 300 million over the next decade, which is a reasonable estimate. 46 percent of respondents answered that increased traffic congestion rates would be the hardest effect to tolerate. Meanwhile, 30 percent said that strain on natural resources would be the hardest to bear consequence; while 19 percent answered that poor air quality would be the most intolerable result.

Packed streets and atrocious traffic have already become a common sight in many major Chinese cities, with several metropolitan roads reporting average speeds of less than 20 km/h. This phenomenon has already spread to third- and fourth-tier cities. Several road construction projects have been implemented in order to help resolve the issue. However, limited natural resources and manpower have made the problems even more apparent. Unable to build the necessary infrastructure in time, many cities have adopted policies aimed at restricting vehicle purchases in order to reduce congestion levels.

Chinese roads were already under a lot of pressure when the total number of vehicles in the country reached 100 million. If the number of automobiles continues to increase by 20 million units each year, the total amount will hit 300 million vehicles in ten years. The sheer number of vehicles is placing an increasingly heavy burden on existing city roads. With limited land and other resources, city officials and planners have had their hands full.

It is not only roads which need to be constructed, but parking spaces and other infrastructure, as well. According to international studies, a ratio of 1.3 parking spaces per automobile is enough to comfortably accommodate parking needs in most cities. However, China is far from those ideal numbers. The southern city of Guangzhou, which has recently implemented a lottery style system for new registration plates, is reported to have only 0.3 parking spaces available per vehicle. Given its limited space, for the city to build new spaces is incredibly difficult. In his book Plan B 4.0, award winning environmental analyst Lester R. Brown estimates that an average American automobile requires 0.07 hectares of road and parking space. Following this logic, 50,000 vehicles need about a football stadium worth of asphalt. Flat land, which is best used for farmland, is the preferred choice of road builders, and is often used for roads and parking spaces. While that model is acceptable in the US, in a country where flat land is incredibly limited, such as China, it is unsustainable.

In addition to the aforementioned problems, high numbers of vehicles also lead to high levels of pollution and put an increasingly heavy strain on natural resources. Even without traffic congestion, continuously dwindling natural resources is still a matter of national concern. China's annual oil production rates have steadily hovered around the 200 million ton level. However, the amount of oil consumed has been increasing by approximately 30 million tons every year. As a result, the country has had no choice but to increase oil imports. According to statistics from the State Information Center, when the total number of vehicles on Chinese roads surpasses 250 million units, the country will have to import 85 percent of its fuel from overseas.

However, there is still hope that resource and pollution issues can be resolved as technology improves. The use of increasingly efficient and cleaner vehicles as the industry develops may help mitigate these issues, which is why traffic infrastructure remains the problem most analysts worry about.

Moving on to the second question, participants were asked if Chinese cities will start introducing policies limiting the number of days vehicles can be driven. Several in the industry have advocated employing such policies to help reduce congestion and pollution. The vast majority of respondents, 71 percent, agreed that such policies would become mainstream in the future. However, only a little more than half of those agreeing believed that such policies would indeed be effective in resolving the aforementioned problems. The remainder believed that such policies would be the natural result of limited resources. Just 16 percent of participants believe that such policies will not come into the mainstream as they infringe on vehicle owners' right to drive. 13 percent were undecided.

The current wave of automobile purchase restriction policies can only prevent problems of traffic congestion worsening. However, the roads in cities which employ or are considering introducing these policies are, for the most part, already overburdened. Furthermore, although policies in these cities have greatly limited the number of automobile sales, the total number of vehicles is still continuing to grow. Therefore, many cities are taking further measures to limit the number of vehicles driven daily. Although the results of such policies, which are already being used in Beijing and Shanghai, are far from ideal, it is impossible to deny their importance in combating the problems of congestion and pollution.

In the final question of the survey, participants were asked if automobile sales in the country would fall as the number of vehicles reaches unsustainable levels. The question is an important for many in the industry, who have already witnessed sales growth rates fall dramatically over the last few years. 43 percent of participants answered that there would be a decrease in sales, but that it would not be severe. A further 25 percent also answered that sales will decline, but believe that the fall will be very sharp, with annual vehicle sales ending up being between 12 million and 15 million units. Only 24 percent maintain that there will be no notable decline, and that annual sales in the country will remain around the current level of 20 million vehicles. The remaining eight percent of participants were undecided.

In a detailed survey conducted with the 21st Century News Group last year, Gasgoo.com (Chinese) found out that several analysts predict that new automobile sales growth in the country will begin to fall after five years. This fall is attributed to the increasing pressure associated with having too many vehicles on Chinese roads. However, a fall in sales growth is by no means equivalent to the market stalling. After resolving relevant social, economic and environmental issues, the market should still continue to expand, as it is currently doing so in other industrialized countries. Negative sales growth is part of the normal fluctuation cycle of the market.