"Chinese roulette" makes Beijing car sales tumble (News Feature)

By Andreas Landwehr Jan 20, 2011, 7:36 GMT

Beijing - Beijing's car showrooms are deserted. 'We haven't sold a single car to a Beijing resident this month,' a Volkswagen dealer in the capital's eastern Haidan district complained.

The surprise announcement at Christmas of a restriction of new car registrations in Beijing from 800,000 in 2010 to 240,000 this year has led to a massive sales slump.

While last year some 2,000 new cars were registered every day in the capital, new numberplates are now being allotted by lot - a Chinese roulette for potential car owners.

'The impact is huge,' the dealer at Beijing Guanghengxin Co, the Volkswagen representative said. 'We only reached 2 per cent of the regular sales volume. And what we sold was to the military.'

The effect of the new rules was enormous, a dealer for French carmaker Citroen said. Customers were not even coming in to look, he said, adding that they, also, had yet to sell a single car this year. 'In December we sold over 100 cars.'

The radical step was made to battle congestion on the roads of the 22-million-inhabitant city, which counts 5 million cars and suffers from daily traffic jams and, often enough, total gridlock.

Trips which usually take 15 minutes can turn into two-hour journeys, the roads resembling giant parking lots, and Beijingers suffering from heavy pollution.

Beijing residents even now have to leave their cars at home one day of the week, depending on the numerals on their numberplate.

The new restrictions are hoped to not only curb the congestion, but also the rising demand for cars.

In January, 215,000 potential car owners applied for the numberplate lottery, but only every 10th will be a winner in the lucky draw, which is to take place for the first time on Wednesday.

In December, rumours about the impeding restrictions led to a sales boom, which quickly subsided after Christmas.

'We have no customers at all,' a dealer of the Chinese small car brand BYD (Build Your Dreams) in the southern Beijing district of Fengtai said.

The weeks before the Chinese Lunar New Year, which is celebrated this year in early February, are usually a peak season for car sales.

'We used to sell about 100 cars during this period,' the dealer at Beijing BYD Fulingfengrui Co said.

Another colleague chipped in: 'I dont know how many cars have been sold this month exactly. But the sales volume has much declined. We sold cars but those cars were all pre-ordered and registered by the end of last year. Excepting that, we are not selling.'

A dealer of another Chinese brand Geely in Tongzhou has similar woes: 'We usually sell 400 cars in January. This year, we sold only 10 since the beginning of the month.' Last month, they sold 2,000 cars.

In Germany, share values of car manufacturers fell following the announcement of the restrictions. German carmakers were aided through the sales slumps triggered by the global financial crisis by strong demand in China.

Nowhere are more cars being sold than in the world's second-largest economy. Last year, overall car sales in China increased by 32 per cent year-on-year to 18 million units.

Volkswagen AG said its sales increased by 37 per cent to almost 2 million units, and its subsidiary, Audi AG, for the first time sold more than 200,000 vehicles in China.

Mercedes, another German carmaker, doubled its sales to 147,000 in 2010.

However, those golden times could soon be over, especially if other congestion-prone Chinese cities follow Beijing's example. In this case, some experts even warn that the overall Chinese market could shrink.

One third of all cars are being sold in only two dozen major cities.

However, Volkswagen, which plans to invest around 10 billion euros (13.4 billion dollars) in the country by 2015 remains optimistic.

Even if the Chinese market is likely to cool down this year, the company said it expected good results over the next few years.

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