Caixin
Apr 18, 2019 04:09 AM
BUSINESS & TECH

Auto Stocks Surge as NDRC Weighs Easing Restrictions

The world’s biggest auto market suffered its first decline in decades last year. Photo: VCG
The world’s biggest auto market suffered its first decline in decades last year. Photo: VCG

Stocks of Chinese automakers surged Wednesday on news that the government is mulling policies to revive slowing sales in the world’s largest car market.

A document circulated on China’s social media showed that the National Development and Reform Commission (NDRC), the top industry policy-setting body, proposed to relax controls on the issuance of car licenses in major cities.

The NDRC distributed the document to government and industry departments on April 11 to collect opinions, Caixin learned. Proposed measures include stopping local authorities from issuing restrictions on new car licenses and to gradually ease existing rules. Some of China’s largest cities have limited access to the auto market as a way of fighting congestion and air pollution.

In the document, the NDRC said the measures are designed to further expand auto consumption and promote a broader supply-side structural reform. People close to the NDRC did not deny the authenticity of the document in response to an inquiry from Caixin.

China’s auto market shrank last year for the first time in nearly three decades. A total of 28.1 million automobiles — including commercial and passenger vehicles — were sold in China in 2018, down 2.8% from the previous year, official data showed. Experts project that this year’s sales will roughly match last year’s, with even weaker momentum moving forward.

According to the document, the NDRC is considering asking authorities in cities that have car license restriction policies to increase the number of new license issuance by 50% this year from 2018 and to double that the next year. Families without any automobile should not be subject to any purchase limit, the agency said.

The NDRC will also require that local governments remove all traffic and purchase restrictions on electric vehicles.

Automaker stocks surged Wednesday afternoon. Shanghai-listed Chongqing Changan Automobile gained 9.9% as the Shanghai index rose 0.29%. Great Wall Motor Co. also climbed 9.9% to its highest close since June 2018. In Hong Kong, BAIC Motor Corp. increased 6.72%, and Geely Automobile Holdings, 12.8%. Electric-vehicle maker BYD Co. soared 14%.

As part of local governments’ protracted battles against traffic congestion and air pollution, major Chinese cities including Beijing, Shanghai, Shenzhen and Hangzhou have introduced restrictions for residents to obtain new car licenses, mainly for fuel-powered vehicles.

The chance for residents to obtain new licenses has become rare in the biggest cities. In Beijing, where a car plate lottery system has been in place since 2010, only 1.23% of applicants can win one. The rate in Shenzhen is 3.14%, while an average ratio for other cities is 6%, according to China Passenger Car Association (CPCA).

In the face of the slowing auto sales, the NDRC has signaled supportive measures. In January, senior NDRC official Liu Yunan said the commission would encourage local authorities to adjust their automobile policies.

Cui Dongshu, secretary-general of the CPCA, said the license-restriction measures have repressed auto consumption in many cities. For instance, car ownership in big cities such as Hangzhou and Guangzhou lagged behind that of much smaller cities such as Suzhou and Dongguan in 2017, according to Cui.

The NDRC also listed various measures to encourage auto replacement, electric car purchases and vehicle sales in rural areas, as well as rule changes to encourage used-car trading, according to the document.

Contact reporter Han Wei (weihan@caixin.com)

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