Serving the World's Largest Emerging Automobile Market
Home > EDITORIAL > Fear consumption to continue driving demand

Fear consumption to continue driving demand

The expected decision arrived unexpectedly in Tianjin.

The municipal government announced at a news conference at 7:00 pm on Sunday, December 15, that the city would enforce a quota on license plates as of 12:00 am on December 16. Additionally, automobiles will be restricted from driving one day a week based on the last digits of the license plate numbers.

The news triggered a nightly frenzy as consumers flocked into the city’s dealer stores and used car marts trying to grab the last numbers of unrestricted license plates.

Tianjin thus becomes China’s 5th city, after Shanghai, Beijing, Guiyang and Guangzhou, to enforce license plate and driving restrictions.

The news is by no means surprising. According to statistics, Tianjin has a residential population of 14 million now. The city’s automobile parc had increased from 1.2 million in 2006 to 2.36 million in 2012. Annual increase in new vehicle registrations has shot up from 70,000 to 300,000. According to a 2011 study, the average speed driving on major roads in the city during rush hours was 19.5 km/hr. Automobile emissions contributed 16 percent to the city’s PM2.5 in 2012.

Earlier in July, China Association of Automobile Manufacturers warned that at least eight cities in China, led by Tianjin, were planning to control the total number of automobiles. Now that Tianjin has acted, it will not be too long for the other seven cities, namely Shenzhen, Hangzhou, Chengdu, Shijiazhuang, Chongqing, Qingdao and Wuhan, to follow suit in a matter of months. More cities may be joining the club of registration restrictions.

City planners are pressured to enforce registration and driving restrictions with the hope of reducing traffic congestion and improving air quality. But the reality in Beijing, Shanghai, Guiyang and Guangzhou shows that little has been accomplished so far.

Contrary to the wishes of municipal governments, the likelihood of administrative restrictions has prompted consumers to purchase automobiles before they are really ready. A major driver for automobile demand in the first 11 months of 2013 was consumer spending on automobiles for fear of registration restrictions. The double-digit growth of 15 percent in passenger vehicle sales was unexpected at the beginning of last year. Fear consumption was a major reason driving 2013’s total automobile sales to around 22 million and total passenger vehicle sales to close to 18 million.

The factor of fear consumption was confirmed by statistics of the eight cities according to Xu Changming, director of Info Resources under the State Information Center. Sales growth of the eight cities suspected of moving into license plate restrictions in 2012 were 10 percent in Tianjin, 12 percent in Shenzhen, 8 percent in Hangzhou, 6 percent in Chengdu, 11 percent in Shijiazhuang, 34 percent in Chongqing, 7 percent in Qingdao and 10 percent in Wuhan. In the first eight months of 2013, sales growth at these cities was respectively 30, 31, 24, 21, 31, 31, 21 and 33 percent. Fear consumption in these eight cities contributed about 1.5 percentage points to the national total.

In the short term, fear consumption will remain a driver for automobile demand in China and it will not be surprising if we see another double-digit growth in 2014.

But the big question is: then what?!

| | | | |

Leave a Reply