​Putting the Brakes on Chinese Car Sales

​The Financialist
 
Traffic and smog are so bad in China that authorities in six cities have put the brakes on new car purchases. Last month, officials in Hangzhou, the capital of the eastern province of Zhejiang, capped new passenger car and minibus purchases at 80,000 for 2014 – less than half of the 200,000 bought last year. To do this, authorities made license plates available only through a lottery and auction system. Hangzhou’s measure will hardly make a dent in China’s overall automobile sales, only trimming annual sales by an estimated 0.6 percent, according to Credit Suisse analysts Bin Wang and Mark Mao. The bigger impact will likely be on sentiment towards auto stocks, since investors may worry more Chinese cities will follow suit. Who is celebrating the news? Fuel-efficient vehicle makers such as China’s BYD Co. Ltd: electric, plug-in hybrid and fuel cell cars are all exempt from the restrictions.

First published in 2014