China's auto industry booms amid challenges

STUMBLING BLOCKS

Despite great expectations, experts are fretting over hurdles that might hold back China's auto sales, including government restrictions, environmental pollution, and the energy crisis.

A number of major Chinese cities have taken measures to restrict car ownership and usage out of concern for environment and traffic congestion.

In February, the government of the southern metropolis of Guangzhou announced a traffic control plan that requires half of all government cars to be off the road when there is a red alert for air pollution, while the remaining government vehicles should follow alternating odd- and even-numbered license plate restrictions.

Other places in the country, including Beijing and north China's Shanxi and Hebei provinces, have already introduced odd-even license plate road restrictions on heavily polluted days.

In March, East China's Hangzhou city, which has been frequently hit by acrid smog, announced a restriction on the issuance of new car licenses, making it the sixth Chinese city to clamp down on car ownership in a bid to ease traffic congestion and combat air pollution.

In addition, China is still heavily reliant on the import of crude oil, meaning that oil supply will still be a challenge in the future, according to experts at an international oil trade conference held in Shanghai in November last year.

Xu Heyi said that these problems have taken a toll on the car industry and contributed to growing overcapacity.

Experts said that while the market should play an important role in tackling overcapacity, car manufacturers will have to dig into other car-related fields like auto finance, new energy cars, and niche market models, such as SUVs and MPVs.

Zhu Fushou said that new energy vehicles are a field worthy of attention, as cities such as Beijing, Shanghai, Shenzhen, and Tianjin have either implemented or are considering favorable policies to promote purchases and production of new energy cars.

China's central government has also provided hefty subsidies since 2010to drive sales of new energy cars and has initiated a pilot program to promote the cars in 40 cities and regions.

"Carmakers should pay attention to these areas if they want to outdo each other in the market this year," Zhu said.