Brilliance (1114 HK) -0.48% only in HK, doesn't look like it will have a big impact on the sector...
Southern Chinese City of Shenzhen to Place Restrictions on Car Purchases
Analysts Say Absolute Impact Will Be Modest
SHANGHAI—In another sign of a harsher environment for the automotive industry in China, the affluent southern Chinese city of Shenzhen has joined other major urban centers in placing restrictions on consumer car purchases.
Analysts say that the absolute impact of the restrictions in terms of car sales will likely be modest. Still, they said, the move could have a broader psychological effect on consumer behavior and put greater pressure on local car brands.
Starting Monday, consumers in Shenzhen are no longer allowed to buy a car without a permit, according to a statement posted yesterday on the city’s website.
China’s major cities have turned to controls on the number of new cars on the road to ease traffic congestion and pollution.
The Shenzhen government will issue 100,000 permits a year, including 20,000 for electric cars, the statement said, adding that potential buyers can obtain a permit either through a lottery system or an auction.
Analysts estimate new car sales in Shenzhen this year were about 250,000 cars, suggesting that new restrictions may result in a sales drop of about 150,000 cars in 2015.
Growth in Chinese new-car sales fell to its lowest level in almost two years in November as economic growth continued to slow. Passenger-car sales for the month rose 4.7% from a year earlier to about 1.8 million vehicles.
In a separate statement, authorities said only cars with Shenzhen license plates will have access to central parts of the southern metropolis during peak traffic hours.
Current drivers who want to replace their cars won’t be affected, since they already have license plates. Research firm JL Warren Capital estimates the upgrade car market in the city to be about an additional quarter of a million cars. “There will be more cities that will see auto-purchase restrictions in 2015,” said Junheng Li, head of research.
Similar restrictions are already in place in the well-to-do cities of Shanghai, Beijing and Guangzhou—like Shenzhen, collectively considered tier-one cities economically in China—as well as in lower-tier cities like Tianjin, Guiyang, Shijiazhuang and Hangzhou.
Yale Zhang, managing director of research firm Automotive Foresight, said Shenzhen’s limits could have a strong psychological effect. “Consumers in nearby cities and other large cities will start to panic-purchase in the first and second quarters of 2015,” he said.
When the northern city of Tianjin announced its measures last year, thousands of residents rushed out to buy cars and some even used gold necklaces as collateral.
Shenzhen is home to Warren Buffett-backed BYD Co. , whose Hong Kong-listed shares plunged by almost 50% earlier this month before regaining most of the drop. The company has said it wasn’t aware of a business-related reason for the drop.
Macquarie Research analyst Zhixuan Lin said Monday’s announcement could hit BYD’s sales of conventional cars more than other car makers. “The flip side is that the Shenzhen government will allocate 20,000 number plates for new energy vehicles, which should benefit BYD,” he said.
BYD didn’t respond immediately to requests for comment Tuesday.
Mr. Lin said scarce license plates could see buyers shift purchase to higher-end cars, benefiting makers of luxury and sport-utility vehicles.
Mr. Zhang said sales of Chinese brands would be seriously hit by the new rules.
“Shenzhen is a city of young migrants who don’t earn high salaries so many look for cheaper, Chinese car brands,” he said.
