Interest-free loans urged as drastic measure to revive car sales in this country

Coronavirus has taken a massive toll on the world's largest car market. Sales are at record lows and factories are only now limping back to life.
By Shubhodeep Chakravarty
| Updated on: 26 Mar 2020, 11:19 AM
This photo taken on March 23, 2020 shows employees wearing face masks working on an assembly line at an auto plant of Dongfeng Honda in Wuhan in China's central Hubei province. (AFP)
This photo taken on March 23, 2020 shows employees wearing face masks working on an assembly line at an auto plant of Dongfeng Honda in Wuhan in China's central Hubei province. (AFP)

Life is slowly but steadily returning to normal in the world's largest car market in the aftermath of coronavirus outbreak. And even if China is not completely out of troubled waters just yet, a sharp fall in new cases of coronavirus has brought some cheer to people at large and the automotive industry in particular.

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The road ahead, however, remains fraught with challenges as demand has plunged to record lows and a revival appears quite the herculean task. As herculean tasks go, they do require drastic preparations and some of the measures suggested to revive the auto industry here appear just that - drastic.

Car sales in February of 2020 in all of China fell by as much as 78% when compared to the same month in 2019. A total of 252,000 units sold in the month may appear a lot but is quite minuscule in the world's most populous country. Factories, many located in the Hubei province which was the epicenter of coronavirus, were shut with workers either leaving or being told to stay at home. This also had a cascading effect on the export lines with almost every major car maker either manufacturing in China or sourcing components from here.

(Also read: This car company is offering zero percent interest EMI for 7 years)

Hope at the end of the highway of hell

Several industry experts in China are confident that the worst is already over. That, however, hardly means that extremely daunting challenges have evaporated. In fact, the real task begins now.

According to Reuters, China has denied any plans to offer stimulus to boost auto sales. That has, however, not stopped some cities in the country from either proposing or implementing drastic steps to bolster car sales.

According to state-run Global Times, some of the options floated include offering exemptions from taxes and making interest-free loans available. The city of Guangzhou has reportedly already rolled out subsidies worth 10,000 yuan ($1,408) to anyone buying cars which run on non-conventional fuels. These are referred to as New Energy Vehicles (NEVs) in China. The city of Hangzhou has proposed increasing car-buying quota for the rest of the year to help OEMs. Some other cities are contemplating incentives for people who drive in their old cars and exchange them for newer models. "As uncertainties hanging over the Chinese economy prop up amid the global pandemic, an auto sales rebound will take longer than expected. It is time for the government to scale up support to release more consumption potential," Tian Yun, vice director of the Beijing Economic Operation Association, was quoted as saying by Global Times.

Regulating the regulators?

Some of the tougher and more complex suggestions, however, have not yet been approved by Chinese regulators. While a more lenient approach from their side, experts say, could be of enormous help to automotive companies, diluting completely could also result in flouting of strict emission and other related policies of the Chinese government. A balance, in such a scenario, could prove to be a tough nut to crack.

First Published Date: 26 Mar 2020, 10:30 AM IST

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