China Bans Government Officials From Driving Foreign Cars

Chinese government officials and departments will only be allowed to buy locally-branded cars in 2012, reported the Wall Street Journal on Tuesday, after the government excluded all foreign brands from a preliminary list of acceptable car models.

Chinese government officials and departments will only be allowed to buy locally-branded cars in 2012, reported the Wall Street Journal on Tuesday, after the government excluded all foreign brands from a preliminary list of acceptable car models.

The Chinese Ministry of Industry and Information Technology posted a list of 412 vehicles that were approved for government purchase this year on Friday, with previously popular offerings from Toyota, Volkswagen and General Motors taken off the list following a nation-wide attempt to boost the local automobile industry.

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The list also excluded any “big or extravagant” car models, with the majority of cars on the list costing just under 180,000 Yuan ($28,500).

The Chinese government spends between 70 billion and 80 billion Yuan ($11.1 billion to $12.7 billion) each year on government-vehicle purchases, said Yale Zhang, head of Shanghai-based consulting firm Automotive Foresight. The move is likely to only a symbolic impact, added Zhang, given that the amount only accounted for less than 5 percent of the country’s overall annual passenger-car demand.

Still, “this signals strong government determination to cultivate China’s own auto industry,’ wrote a report by the China International Capital Corp, as quoted by Bloomberg, on Monday.

[quote]“Government support of local brands is greater than expected, even though rumours about the policy were many in the past several months.”[/quote]

Foreign car models currently account for about 80 percent of the Chinese government’s automobile fleet, with the central government hoping to reverse this trend in the near future.

Still, many analysts have doubted the feasibilities of the new rule, particularly due to the difficulty in implementing the scheme across all levels of government.

The policy “lacks details” and its bite is uncertain, said Yang Xueliang, a spokesman for local automobile company Geely to the Financial Times. “It is not clear how this policy would restrain all levels of government purchase,” he added.

[quote]“Unless they categorically state that this law applies to all government levels, the chances are that ministers in Ningxia for example, will still crave an Audi model like their compatriots in Beijing,” noted Namrita Chow, an auto analyst at IHS Automotive in Shanghai.[/quote]

Similarly, the foreign car companies are also barely troubled by the latest government policy, given their successes in the private market.

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“The majority of the Volkswagen Group China’s sales are conducted with private costumers,” said a statement by the company on Monday. “The amount of the so-called fleet sales with government vehicles has been at a lower single-digit percentage range for years.”

“The economic consequences of these new regulations are limited,” added the company.