Commentary: Buying a car has lost its lustre in China
Many automakers have seen sales plunge in China last year but bright sparks remain in the electric vehicle industry where the numbers are on an uptick, says China-based commentator Tom McGregor.
BEIJING: Time for some brutal honesty, because global auto industry executives do need to hear it whether they like it or not. Chinese consumers are just not into cars anymore and any hopes of a dramatic rebound do not appear likely in the year ahead and perhaps even for the mid-to-long term outlook.
Truth be told, the heydays of Chinese consumers rushing to purchase auto vehicles, particularly foreign-made brands, have long since vanished.
And in recent years, the Chinese government had not helped auto manufacturers by imposing very strict regulations on car purchases in urban zones, never mind periodic news of new car factories being opened like Tesla’s Shanghai plant last July.
TIGHT LICENCE PLATE MEASURES
In China’s most populated cities, local residents must have an officially recognised licence plate in their hands before obtaining legal permission to purchase a passenger vehicle, but annual quotas for licence plates are very restrictive.
According to the Global Times, car buyers in Beijing must register for a licence plate lottery, while in Shanghai, the country’s financial centre, prospective buyers have to enter into an auction process, in which the highest bidders win the plates.
The chances of a Beijing resident winning the city’s car lottery stood at 1 out of 2031, as of June 2018, a lottery that saw more than 3 million prospective new buyers vie for over 6,000 plates.
But the odds are even worse for Shanghai residents. The Economist reported that on account of auction bidding, it’s routine for licence plates to cost more than the purchase of the actual vehicle.
And government planners have no intentions of changing policies, despite the harm it has caused to the working poor and middle-class communities in China’s first-tier cities that apply this auction system, for whom getting a car to get to work has been a necessity that has now been swept aside.
UN CLIMATE CHANGE PACT'S IMPACT ON CHINA
You can thank the United Nations Climate Change Pact for a large part of that. Signatories to the the UN treaty are expected to demonstrate verifiable evidence of carbon emissions reductions and the best way for Beijing to achieve that would be through curtailing motor vehicles on the roads.
Meanwhile, US President Donald J Trump has shuffled the US out of the UN Climate Change pact.
Perhaps environmentalists thought ride-sharing could come to commuters’ rescue, since Chinese city public transportation – in terms of buses and subways - have already hit peak passenger capacity.
But good luck riding the Beijing Metro during rush hour. You are likely to feel like “cramped sardines”. According to one recent survey, 93 per cent of young Chinese feel “severely troubled” when commuting to and from the workplace.
DIDI CHUXING LOSES TRUST
But why did ride-sharing not become the natural solution for squeezed commuters when car prices are so extraordinary and gaps in the growing public transport system remain?
That’s because the nation’s largest ride sharing company Didi Chuxing had its services suspended indefinitely last year after two separate Didi male drivers were convicted of sexually assaulting and killing two female passengers, and these curbs are expected to remain in place until better standards are implemented, said Chinese authorities.
Didi admitted that it had received complaints from users against both drivers but failed to take action.
Didi users had been able to go around safety controls on Didi’s app to use the account of another or pose as female drivers. And when a male driver got to his passenger, she could either choose to ride with him despite being duped into thinking she was riding with a female driver or risk getting logged out of the system if she cancels the ride.
Didi has since taken reparative action, but even with fixes to ensure security, it will be an uphill climb to try to restore public trust.
FORD BOMBS WITH LUXURY TRUCK ROLL-OUT
In 2017, Detroit automaker Ford launched a huge advertising blitz in Shanghai promoting its super-sized Built Ford Tough F-150 Raptor.
In the US, it was cause to feel proud, seeing a domestic automaker portrayed with strength and machismo. But in framing the Raptor Ford as an upclass luxury car, and hiking up prices by almost four times more, it was a huge gamble that did not pay off for Ford.
Not only did the episode leave a sour taste in the mouths of Chinese consumers, it also suggested poor cultural awareness of Chinese attitudes in the Shanghai market, where many pride themselves to be sophisticated city slickers – who an upclass muscle car was appealed to the least.
Ford car sales plunged in China last year by about 55 per cent, its lowest level in the country since 2012.
HOPE STILL SPRINGS ETERNAL
Although the outlook for the Chinese consumer market remains bleak, there are still positive signs of a potential early recovery.
The China Car Passenger Association has just released a report highlighting that new energy vehicles sales in China last year had totalled over 1 million units, a remarkable 83 per cent increase year-over-year. The vast majority of such vehicles were “made in China”.
In global rankings, China has become the world’s largest buyer of electric vehicles. Nonetheless, if Chinese cities don’t resolve their licence plates conundrum, don’t expect electric vehicles to save China’s domestic car market.
Tom McGregor is a commentator on Asia-Pacific affairs based in Beijing.