four trillion yuan economic stimulus package seems to be working a treat. That is, if the queue of people waiting for a test
drive in the Honda dealership was anything to go by. The tide turned on January 20th when the government halved its earnings
from purchase tax (from 10 to 5 per cent) on cars with smaller engines. Most of the people watching TV in the Honda showroom,
though, had been waiting to drive the 1.8 litre Civic, which is a splash or two higher than the 1.6 litre qualifying
size. But, thanks to the marketers at Honda’s quick response, no one there was thinking that they would be losing
out on the tax giveaway. That’s because Honda are offering a 5 per cent special discount on the Civic that cancels out
any perceived advantage enjoyed by manufacturers whose stables are dominated by 1.6 litre vehicles and lower.
Before my weekend tour of
the car showrooms I had thought that the strong performance in March car sales had been driven by far deeper discounts than
the paltry 5 per cent that is being offered by Honda. But, no matter where I tried, I found it impossible to get any
offer exceeding that level.
Compared with what’s going on in other parts of the world, car sales in China
are in a completely different gear. In March, passenger car sales (including SUVs and MPVs) increased to 772 thousand.
That’s 27 per cent more than in February and more than ten per cent compared with the same month last year.
The figures further consolidate China’s position as the world’s biggest auto market – a position it has
now held for three consecutive months. If China is motoring ahead, then the US is in reverse gear – and a high
ratio one at that (last month, vehicle sales were down 37 per cent year-on-year).
“How was the test drive”, I asked Ms Zhou, who had her eye
on a bright red Honda Civic.
“It’s too busy,” she said, “I couldn’t even get out on
to the main highway.”
The sprawling area of more than 20 car showrooms in eastern Beijing was indeed jammed with would-be car buyers and an increasing
number of people who think that the time is now right to trade up to a better car.
The days when large sedans dominated the roads, and when black Audis
with blacked-out windows took their places in front of the swankier restaurants, are long gone however. These days,
people are choosing a car based on their lifestyle requirements; although status of course still plays a part (where in the
world is that not the case?).
But, in China, the nature of status is changing. Size, although still important, is a less
weighty factor in the decision-making process than it was. Style, technology, and safety are contributing increasingly
more “points” to the buying decision.
This changing attitude is just one of the factors that is driving the growth in smaller
cars. In the first quarter of this year, 1.41 million cars at 1.6 litres and below were sold in China – that’s
seven out of every ten new cars.
Ms Zhou, though, was determined to do her bit to help the ‘above 1.6 litre’ category.
“I will buy it [the Honda Civic] because it has a very advanced engine,” she said, “…and I just love
the styling”. But, just as important, she confided, “the five per cent discount means that I pay the same
tax as if I were to buy a 1.6”.
Somehow, her mind had been made up before the test drive. Which is just as well, because
she was only able to get the Honda’s “advanced engine” into third gear before the sheer weight of traffic
visiting Beijing’s “car city” slowed her down to a crawl.