Beijing traffic rules turn car showrooms into ghost towns

For the past year, car showrooms in Beijing have been heaving with people keen to buy their slice of the country's new middle-class dream. But now they are deserted.

Last month, Beijing said it would slash the number of new registrations for 2011 to ease chronic gridlock and thick pollution in the capital - good news for frustrated drivers but terrible news for car dealers and would-be buyers.

Li Hao, a sales manager for Chinese automaker Chery, told AFP he had not sold a car since December 24, when the tough restrictions took effect.

"We definitely won't make money this year," Li told AFP, as he sat in the showroom, which was nearly empty except for a few bored-looking sales assistants and a handful of customers finalising earlier purchases.

"Our income and sales will definitely drop and I'm worried about my own income and job. Every car salesperson is thinking about this problem."

In an attempt to ease severe traffic congestion, Beijing will allow 240,000 cars to hit the roads this year through a licence plate lottery system - about one-third of the number of new cars registered in 2010.

Expectations about the new car curbs sparked a surge in December sales, with about 20,000 sold in the first week of the month alone, state media said - more than double the 9,000 cars sold in the same period in 2009.

China's decision to scrap tax cuts for small cars from January 1 also boosted sales.

Li said his dealership had been packed with customers wanting to buy a set of wheels before the new rules took effect.

One of those people was Tian Mao, a 33-year-old wine salesman who wanted a car to make his lengthy commute more palatable.

As soon as he heard reports about the new restrictions, he went to the Chery showroom and paid 70,000 yuan (10,600 dollars) for a car.

"I'm very happy. I bought the car a week before the new rules were introduced. It was quite cheap," Tian told AFP as he finished his ownership paperwork.

As well as easing bottlenecks - deemed the world's worst in an IBM survey conducted in mid-2010 - authorities hope the new rules will help clean up the notoriously dirty air in the city of 19 million people.

Air quality has been getting worse amid high demand for private vehicles from the city's increasingly affluent residents - and has been blamed for deterring people from riding their bicycles instead of driving cars.

But environmental activists said the rules would have little impact on pollution levels in the capital.

"This is a policy that really came too late," Yang Ailun, climate and energy campaign manager for Greenpeace China, told AFP.

"It came at a time when the traffic and the local pollution problem in Beijing are already out of control."

Other cities around China, which overtook the United States as the world's biggest car market in 2009 and which this year is expected to see total sales of 20 million units, are introducing measures to relieve congestion.

Shanghai, which has about one-third the number of registered vehicles as Beijing, even though the populations of the two cities are about the same, has restricted new number plates for many years.

In the southern city of Guangzhou, authorities are trying to reduce traffic by ordering cars off the roads based on the last digit of the licence plate.

A similar system is also in place in Beijing but is widely ignored - and blamed in part for the exploding number of cars clogging the streets, as some residents have simply bought another car to stay behind the wheel.

Analysts nevertheless believe Beijing's new rules will only put a small dent in car sales this year.

"The overall impact on the auto industry is not going to be very big - about 200,000-300,000 units per year," said John Zeng, an analyst with IHS Global Insight in Shanghai.

Zeng estimated sales would be boosted by people buying new cars to replace their old ones, while others will register their cars in neighbouring provinces to get around the restrictions.

The real victims of the measures will be small dealerships, said Zeng, who believes 20-30 percent will be forced to close.

Other predictions are more dire. The National Passenger Car Information Exchange Association forecasts 50 percent of car dealers will be driven out of the market, the China Daily said.

As he looked across the empty showroom, Li said he expected monthly sales to plunge to 45 units this year from 200 units in 2010. Apart from reducing staff salaries, Li doesn't know how he will make up the shortfall.

"I haven't come up with a very good idea so far to increase sales or income," he said.

"We can only wait and see what happens."