ALTHOUGH China's auto market seems to be rallying, there are a few factors, apart from the soaring oil prices, that may hold back potential buyers.
Chinese customers, 80 percent of whom are first-time buyers and who are more likely to choose economic models, may be put off by the rising costs of compulsory insurance, car plates and parking fees.
Insurance costs
The owners of China's 130 million cars, motorcycles and tractors are required by the country's insurance regulator to buy compulsory vehicle insurance starting on July 1 as the government tries to protect the interests of injury victims and encourage safe driving.
The nationwide annual premium for family cars with less than six seats is 1,050 yuan (US$137), with the highest compensation of 60,000 yuan.
Buyers of a compact car costing around 100,000 yuan will spend another 5,000 yuan for insurance, up from 3,500 yuan before the new policy.
Hu Song, a Hai Tong Securities Co Ltd analyst, said that the new policy can also be seen as a kind of macro-control by the government to protect the market from overheating.
Amid rising costs, some auto dealers partly attributed the sales slowdown in June, a non-peak season, to the new insurance policy and have therefore stepped up measures to boost sales. "In order to ease the burden on buyers and boost sales, we pay the insurance for them as a discount for buying our models," a dealer said.
Dealers of General Motors Corp, Toyota Motor Corp, and FAW Haima Motor Co Ltd are offering such discounts, covering some of their models.
Car plate woes
Compared with the several hundred yuan increase on insurance, buyers are likely to be more worried about the sizzling prices of local car plates.
The successful bid price for a car license has been hovering around 40,000 yuan over the past five months, almost as high as the price of a new Chery QQ sub-compact model.
"The excessive high prices are more likely to dampen sales of small compact cars, such as Chery QQ and Fiat's Siena, as their targeted customers are price-sensitive," Wang Liang, a Chery dealer, explained.
Shanghai is the nation's only city to hold auctions for car plates since 2000 as the local government tries to limit the car population and ease traffic jams.
But the limited availability of plates has caused the average winning price to climb from 14,415 yuan in 2000 to 37,317 yuan this year.
More autobuyers choose to buy car plates from nearby cities, which cost around 3,500 yuan, almost one-tenth of the plate price in Shanghai.
Although there are limits imposed on cars with plates from other cities - for instance they are banned from using elevated roads during rush hours - the low plate prices are attracting cost-conscious Shanghainese.
"About 10 percent of cars we sold in Shanghai use car plates from other cities and the figure is expected to grow fast if the price remains high," said Tang Hua of Yongda Automobile Sales Group, Shanghai's largest car sales company.
Parking fees
In addition, the growing car population means there is a paucity of parking lots, which pushes up parking fees.
Many big cities such as Shanghai and Shenzhen have opted to hike parking fees to tackle complaints about overloaded parking lots, which raises driving costs, too.
The top price for parking cars in a garage of an office building located in Shanghai's downtown Jing'an District has risen from a maximum of 30 yuan a day to 80 yuan
http://www.shanghaidaily.com/art/2006/08/02/287885/Soaring_additional_costs_put_the_brakes_on_fervor.htm
Chinese customers, 80 percent of whom are first-time buyers and who are more likely to choose economic models, may be put off by the rising costs of compulsory insurance, car plates and parking fees.
Insurance costs
The owners of China's 130 million cars, motorcycles and tractors are required by the country's insurance regulator to buy compulsory vehicle insurance starting on July 1 as the government tries to protect the interests of injury victims and encourage safe driving.
The nationwide annual premium for family cars with less than six seats is 1,050 yuan (US$137), with the highest compensation of 60,000 yuan.
Buyers of a compact car costing around 100,000 yuan will spend another 5,000 yuan for insurance, up from 3,500 yuan before the new policy.
Hu Song, a Hai Tong Securities Co Ltd analyst, said that the new policy can also be seen as a kind of macro-control by the government to protect the market from overheating.
Amid rising costs, some auto dealers partly attributed the sales slowdown in June, a non-peak season, to the new insurance policy and have therefore stepped up measures to boost sales. "In order to ease the burden on buyers and boost sales, we pay the insurance for them as a discount for buying our models," a dealer said.
Dealers of General Motors Corp, Toyota Motor Corp, and FAW Haima Motor Co Ltd are offering such discounts, covering some of their models.
Car plate woes
Compared with the several hundred yuan increase on insurance, buyers are likely to be more worried about the sizzling prices of local car plates.
The successful bid price for a car license has been hovering around 40,000 yuan over the past five months, almost as high as the price of a new Chery QQ sub-compact model.
"The excessive high prices are more likely to dampen sales of small compact cars, such as Chery QQ and Fiat's Siena, as their targeted customers are price-sensitive," Wang Liang, a Chery dealer, explained.
Shanghai is the nation's only city to hold auctions for car plates since 2000 as the local government tries to limit the car population and ease traffic jams.
But the limited availability of plates has caused the average winning price to climb from 14,415 yuan in 2000 to 37,317 yuan this year.
More autobuyers choose to buy car plates from nearby cities, which cost around 3,500 yuan, almost one-tenth of the plate price in Shanghai.
Although there are limits imposed on cars with plates from other cities - for instance they are banned from using elevated roads during rush hours - the low plate prices are attracting cost-conscious Shanghainese.
"About 10 percent of cars we sold in Shanghai use car plates from other cities and the figure is expected to grow fast if the price remains high," said Tang Hua of Yongda Automobile Sales Group, Shanghai's largest car sales company.
Parking fees
In addition, the growing car population means there is a paucity of parking lots, which pushes up parking fees.
Many big cities such as Shanghai and Shenzhen have opted to hike parking fees to tackle complaints about overloaded parking lots, which raises driving costs, too.
The top price for parking cars in a garage of an office building located in Shanghai's downtown Jing'an District has risen from a maximum of 30 yuan a day to 80 yuan
http://www.shanghaidaily.com/art/2006/08/02/287885/Soaring_additional_costs_put_the_brakes_on_fervor.htm