China Plans to Widen Vehicle-Purchase Limit as a Solution to Pollution image

China plans to impose further auto purchases restrictions to fight congestion and pollution, but at the same time threatening auto sales.

Eight more Chinese cities might comply with the measures which limit vehicle purchases, according to Shi Jianhua, deputy secretary general of the China Association of Automobile Manufacturers. The rules could reduce vehicle sales by 400,000 units or 2% of nationwide sales. The most affected will be the local brands, as the restrictions will make vehicle ownership more inconvenient, undermining the appeal of cheaper cars.

“In the short term, the market will just jump in those cities,” said Yale Zhang, managing director of Autoforesight Shanghai Co. “Consumers will panic and will start to buy whatever they can before the measures.”

The city of Shijiazhuang has proposed limiting vehicle ownership by using a lottery. The China Association of Automobile Manufacturers opposes these restrictions as they deprive people of owning a car, affect efforts to boost consumption and don’t so much to ease traffic jams anyway. In February the auto group said that the auto industry has been made the “scapegoat” for the toxic smog, when it is the coal-fired power plants those that should bear the blame.

In June passenger vehicle sales increased 9.3% to 1.4 million vehicles, as dealers offered bigger discounts to clear stocks and also to meet half-year goals amid a cash crunch strategy and the fear that economy begins to slow down.

Source: Bloomberg