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For Beijing, more to do to unshackle vehicle sales, services
Yang Jian | 2019/3/8

SHANGHAI -- The Chinese government, in a major policy shift triggered in large part by pressure from the Trump administration, last year slashed vehicle import tariffs and started to allow foreign automakers to gain control of local joint ventures. 

Now with China¡¯s economy sputtering, Beijing might want to dismantle other regulatory hurdles in the auto industry, especially restraints on the sale of pickups, used vehicles and aftermarket parts and services. 

China and auto industry officials have been aware of the restrictions but haven¡¯t bothered to address them because new-vehicle sales grew rapidly for many years before 2018. 

Pickups are still categorized as commercial vehicles by traffic regulators and only six of the 31 provinces, municipalities and minority regions in mainland China allow such vehicles to be used in local cities. 

Yet there is strong demand for pickups, one of the most profitable types of vehicles in some markets, notably the U.S. While overall new-vehicle sales dipped 2.8 percent to 28.1 million in China in 2018, new-pickup deliveries rose 1.3 percent to approach just 360,000. It remains an untapped market in large parts of China.

Likewise, most city governments still do not allow used vehicles bought elsewhere to be sold in their cities as part of efforts to control emissions. Despite urging from the central government in 2016, only cities in 14 provinces have lifted the restriction. 

While used-vehicle sales advanced 11 percent to 13.8 million in China last year, they are equivalent to just 49 percent of new-vehicle sales. 

The strictest and most anachronistic regulations in China are laws governing the aftermarket refinement and modification of light vehicles.
 
China, which overtook the United States to be the world¡¯s largest new-vehicle market in 2010, had more than 327 million vehicles in operation by the end of last year, according to government statistics. It¡¯s a largely untapped market that undermines sales of aftermarket auto parts and services.

Yet, car owners are still subject to rules incorporated under China¡¯s road traffic law in 2003, which prohibit elevated vehicle chassis and modifications to vehicles¡¯ intake or exhaust systems. 

Under the rules, consumers who want to change a vehicle¡¯s body color or replace engines are subject to lengthy regulatory approvals. They must also submit a modified vehicle for annual inspection to make sure it remains identifiable to local traffic regulators. 

The regulations make it hard for vehicle owners to refine or modify vehicles to personal tastes. As a result, only about 5 percent of China¡¯s light-vehicle fleet had been refined or modified by owners last year, according to statistics compiled by Great Wall Motor Co., China¡¯s largest light-truck maker.

As the economy keeps losing steam, it will be harder for Beijing to reverse the downturn in the new-vehicle market anytime soon.

But as long as the central government can prod provinces and cities to change attitudes toward pickups and used vehicles, and to make traffic laws friendlier to hobbyists and tuners, it could unleash pent-up demand for a sizable number of used vehicles and drive parts and service demand higher. 

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