Auto Industry

Feast to famine

Guangzhou restricts car sales

Feast to famine

“I’ll take the lot”: Guangzhou car dealers were selling cars till midnight

For Guangzhou’s car dealers business had never been so good, even if their commercial nirvana was to last just three, short hours.

That’s because the sudden sales blitz was a one-night-only affair, following a dramatic announcement from the municipal government. It said it would cap the number of new vehicle registrations in the city – halving last year’s total for the coming 12 months.

The news came at 9pm (after the car showrooms had closed) on June 30, with the ban effective from midnight.

The short-term goal: to reduce congestion and pollution in the city. But the immediate impact was a stampede of new business, as showrooms raced to reopen and meet the sudden flood of last-minute demand. Deals beat the deadline as long as payment was received by midnight, and the dealerships then ploughed through the paperwork until the following morning.

Guangzhou is being overwhelmed in a tide of traffic. According to local government data, average vehicle speeds in the city have dropped to about 20km/h for the 2.41 million vehicles on the roads at the end of May. Plus it’s getting much harder to find a place to leave your vehicle, with three times as many cars as parking spaces in the city.

After their midnight feast, the city’s dealers now fear an extended famine, NetEase Finance reports. That follows the experience of Beijing, where ownership restrictions are also in force. As a result of these, the capital’s sales of new cars fell by a little over half last year, with lots of dealers forced to shut up shop.

The prediction is that a third of the dealerships in Guangzhou could now close too.

The restrictions on licences also benefit the premium car brands, NetEase suggests. After winning one of the coveted chances to buy a car (the expectation is that prospective buyers will draw lots) customers will probably be more inclined to buy expensive models. For the lower-priced brands, this is a double whammy as their lower profit per unit means that they need to sell in greater volumes – which is less likely when restrictions are in place.

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