Struggling auto dealers in the Beijing market are bracing themselves for more bad news. In the four years after 2014， the number of cars available for sale in the Chinese capital will be restricted to 150，000 per year， a drop of 90，000 compared to 2013.

Beijing announced the policy of restricting car sales in December 2010. Every year only 240，000 vehicles go on sale， making a serious dent in auto makers and dealers’ profits. Before the policy was adopted， Beijing’s auto market was thriving. In 2010 alone， 920，000 vehicles were sold in Beijing. The sales restriction policy cut 74 percent of car sales in the city.

The purpose of this policy was to al- leviate road traffic. But in response to serious air pollution， the Beijing Municipal Government adopted this policy as a measure to reduce carbon emissions. On November 5 it announced that from 2014 the sales quota will be reduced from 240，000 to 150，000 vehicles each year. Among the total， the quota for new energy vehicles will be gradually increased from 20，000 to 60，000 per year and that for ordinary cars will be gradually reduced to 90，000 by 2017.

Besides Beijing， cities like Tianjin and Shijiazhuang， capital of Hebei Province， are also considering restricting car sales because of air pollution.

Su Hui， Deputy Secretary General of China Automobile Dealers Association， said one fourth of Chinese cities are suffering from serious air pollution and road traffic， so it will be an inevitable trend for other cities to limit car sales. This is presently the most effective， and a makeshift way to solve air pollution and road traffic.

According to figures from the China Association of Automobile Manufacturers（CAAM）， in the first half of this year， 10.78 million automobiles were sold in China， ranking first in the world. All the world’s major auto makers have entered the Chinese market. Since Detroit declared bankruptcy， China has become the main target of international auto makers. It is uncertain whether restrictions of car purchases in some Chinese cities will make these major players more prudent when developing the Chinese market.

Local brands suffering

Li Wei， a dealer of Chery cars in Beijing， feels great pressure from the car sales quota. He failed to fulfill his sales target in 2012. Anhuibased Chery is a leading homegrown carmaker. Its first car model QQ was once popular across the country.

Like Chery， other Chinese auto makers also have a shrinking market share in Beijing. Dong Feng Aeolus used to have three dealerships in Beijing， but now there is only one； the number of Haima Automobile’s dealerships in Beijing has reduced from four to three. A luxury model C30 from Great Wall Motor was priced at 64，500 yuan （$10，522）. To scramble for market share， dealers cut the price to 48，000 yuan （$7，830） in June， but sales performance was still not satisfactory.

If other cities also adopt a similar policy of buying restrictions， “it will be more difficult for Chinese brands to get by，” Li said. Some dealers will have to close.

At a press conference held by CAAM on November 11， Chen Shihua， Director of CAAM’s Industry Development Department， described the production and sales volume of passenger vehicles in China’s auto industry in October as increasing remarkably， but market share of Chinese brands continued declining in the passenger vehicles market.

According to CAAM figures， from January to October， 2.61 million Chinese-brand cars were sold， accounting for 26.9 percent of total car sales. The market share was 0.4 percentage points lower than in the same period last year.

In Beijing， market share of Chinese manufacturers dropped from 19.8 percent in 2010 to 11 percent in the first half of this year.

Compared with Chinese brands， the performance of international manufacturers seems much rosier.

CAAM figures show that in October automobile sales in China hit a new high in the recent nine months， with foreign brands recording the fastest growth.

Ford and its partners sold 741，818 vehicles in China within the first 10 months， a year-on-year increase of 52 percent， surpassing the total sales volume of 626，616 vehicles in 2012.

Dongfeng Peugeot Citroen Automobile Co. Ltd.， a 50-50 joint venture of China’s Dongfeng Automobile and France-based PSA Peugeot Citroen， sold 447，198 vehicles in the first 10 months this year， up by 26 percent year on year， higher than the total sales volume of 440，000 vehicles last year.

Japanese brand cars are also selling well. They were seriously affected last year by the territory dispute between China and Japan， but this year they have recovered from the interruption. In October sales of Japanese brands doubled to reach 272，800， with market share rising from 7.6 percent a year ago to 17 percent.

After Beijing announced car purchase restrictions in December 2010， the number of dealers for Chinese brands has reduced， but that for international manufacturers， especially luxury brands， is growing. In Beijing， 22 new 4S stores were set up in 2011， most of which were for brands such as MercedesBenz and BMW.

“Before the purchase limit， people might choose Chinese brands as their first car because they could easily change to another car in the future，” said Li. “But after the purchase limit， most consumers only consider foreign brands when buying cars. In their minds， foreign brands are more reliable than Chinese ones.” However， Li denies that the quality of Chinese brands is inferior.

Opposing restrictions

How has the purchase limit policy alleviated road traffic and reduced pollution in the past three years？ There are no official data or reports， but objections to the policy have been ongoing.

CAAM’s Chen has been opposing the policy. He thinks the serious air pollution in China is closely related to heavy industries and the unreasonable industrial structure and Beijing’s poor road layout and management. Therefore limiting car sales should not be the way to control pollution and traffic.

During the National Day holiday（October 1-7） this year， the number of vehicles running in Beijing reduced by half， but the city still had three days of serious smog. Some netizens hence asked the municipal government to explain why smog still occurred.

Chen said stimulating consumption and transforming the economic growth pattern is now a focus for the country. According to figures from the National Bureau of Statistics， in the first half this year consumption related to automobiles contributed 12 percent to the country’s total retail sales of consumer goods. Therefore automobiles are an important factor driving up economic growth. Once car restrictions are extended to more cities， the country’s economic growth speed will be negatively affected.

Chen thinks to reduce air pollution caused by automobiles， the government can vigorously support the development of new energy vehicles and encourage the purchase of these cars. Moreover， it can properly guide the more reasonable use of cars. For example， for shorter distances people can choose walking or public transport. But restricting sales is not a permanent solution.