Transportation systems around the world have different characters.
In cities with a high population density, like Hong Kong and Singapore, residents depend mainly on public transport.
In European and US cities, which have lower population densities, private vehicles are a necessity.
But mainland China has chosen the wrong path: the encouragement of private car ownership in crowded cities.
While vehicle sales increase and carmakers make big money, severe air pollution and traffic jams have become headaches.
The government has to spend a large amount of money and effort to tackle these issues and carmakers are now entering a tough period.
As being stuck in traffic jams during peak hours in private vehicles becomes a torture, consumers have become less interested in buying private cars than in previous years.
The government, too, is turning its back on carmakers. It now allots big subsidies to develop the public transportation system.
Among private cars, only new-energy vehicles qualify for subsidies.
High growth in the market for passenger cars is over.
In the first three months of the year, the total sales volume of mainland vehicles rose 5.98 percent year on year as growth in passenger vehicle sales slowed and sales of commercial vehicles stabilized.
Sales of new-energy car outperformed.
Last month, the sale volume of new-energy cars rose 46 percent year on year. And the total sales volume for the first quarter doubled from a year earlier.
China has become the world’s largest market for new-energy cars. It is expected that, by 2020, annual sales of new-energy cars in the country will reach 750,000 units.
But as battery technology has yet to mature, the price of batteries is relatively high, and charging facilities are insufficient, so the penetration of new-energy cars has been slow.
Beijing, Shanghai and Shenzhen are better equipped with charging facilities, but buyers of new-energy cars in lower-tier cities get less support.
The high growth in the new-energy car industry is partly due to a low base of sales.
In the long term, as the government provides strong support for public transportation and high density in mainland cities, the market for private vehicles will have limited room to develop.
Som the outlook for carmakers’ stocks is not quite positive.
This article appeared in the Hong Kong Economic Journal on April 29.
Translation by Myssie You
[Chinese version 中文版]
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