Automakers Consider China Sales Restrictions Ineffective image

China wants to restrict auto sales in 8 more cities, but automakers are not worried as they expect organic growth in the market to outweigh any restrictions.

The government has already imposed new vehicle sales restrictions in Beijing, Shanghai, Guangzhou and Guiyang, as it limited the number of license plates and implemented lotteries and auctions to sell them. Now 8 more cities might be added and Shi Jianhua, the auto association’s deputy secretary general, warned that these measures, if they will be implemented, will reduce auto sales by 400,000 units.

“We expect licensing restrictions to have limited impact on new car sales,” said Bob Socia, head of China operations for GM.

Analysts predict that any drop in auto sales will be offset by increase elsewhere in the country’s vast market, as wealth continues to spread to smaller cities. Socia said that auto sales in large cities such as Beijing and Shanghai will become less important as the market starts maturing.

“If all 25 cities with severe traffic situations in China were all to implement restrictions in 2015, we estimate that the impact to GM car sales would only be about 2-3 percent,” Socia said.

Automakers not only begin to turn their attention to smaller Chinese cities, but they also believe that the restrictive auto purchase strategy might be as ineffective in solving the congestion and air quality issues, as they might be in stemming overall auto sales.