China's auto sales slump has spurred the government to bring back 2009’s ‘cash-for-clunkers’ scheme - or has it?
Another one for the scrap heap Image: Denizen24 |
In an effort to revive the nation’s slowing auto market, China’s cabinet was reported to have decided to revive a series of financial incentives to trade in passenger cars for discounts on new models. The decision was suggested as the world’s largest vehicle market has seen sales decline 1.3% through the January-to-April period, the worst decelleration since 1998, according to the China Association of Automobile Manufacturers.
While the cabinet was believed to have has approved the plan, the relevant ministries had yet to release the specifics, such as types of vehicles covered and exact amounts of state funding.
Then a new message was delivered by Chen Jianguo, Deputy Director of The National Development and Reform Commission, stating that there were no imminent plans to introduce any kind of stimulus and tthat a feasibility study was still underway. According to Chen, "the issue has to be studied closely, such as what vehicle types are eligible. There's not much meaning to subsidize farmers to drive sedans."
The previously suggested government agreement was set to recreate a similar effect of the 2009 incentives, which spurred CNY 49.6 billion ($7.8 billion) in new car purchases.
However, some industry analysts were already sceptical of the potential schemes, claiming them to be unnecessary and potentially disruptive to the market’s overall trajectory. Managing editor of Automotive News China, Yang Jian, believes any surge created by incentives would be purely temporary and will drop off as soon as the scheme ends. This, in turn, would lead to another worrying sales slump which may cause a lack of consumer confidence in the markets stability.
Clearly, like the NDRC, Yang believes the slowdown in the Chinese auto market is both acceptable and necessary, and claims that any scrappage incentive would “send the wrong message to the market.” China’s auto sector, and indeed economy, is now shifting down a gear to a more sustainable pace, but artificial stimuli may only serve to create abnormal spending habits and prevent proper consolidation of its fragmented and weak domestic car makers.