To stimulate policies, let the auto market correct itself

After experiencing two years of rapid growth in 2009 and 2010, the auto market has seen a significant slowdown since last year. Recently, it was reported that in order to prevent a downward trend in economic growth, a new round of auto consumption stimulus policies will be introduced in the near future. Among them, the end of December 2010, the end of the car to the countryside and the old two new subsidies policy will be expected to be continued, and 60 billion yuan energy subsidies were released. More than a year later, the auto market stimulus policy is about to come back. Will the auto market usher in a new wave of "policy cities"?

Compared with the Western developed countries' auto market, one of the distinctive features of the Chinese auto market is its strong policy influence. Since the second half of 2008, the domestic auto market has continued to slump under the impact of the international financial crisis. In order to deal with the international financial crisis, the State Council launched ten major industry revitalization plans in early 2009, including the adjustment and revitalization plans for the automobile industry. With the promotion of a series of policies to expand automobile consumption, including the reduction of vehicle purchase tax, the use of vehicles to the countryside, and trade-in replacement, the Chinese auto market has stabilized and has experienced strong growth. Driven by the automotive revitalization plan, China's automobile production and sales increased from more than 9 million vehicles in 2008 to more than 18 million in 2010, and doubled in two years. The Chinese auto market also surpassed the United States to become the world’s largest-selling auto market.

However, after a short period of stimulus, it is difficult to maintain the balance of a market for a long time. In 2011, the policy of stimulating consumption, such as the reduction of vehicle purchase tax, automobile transportation to the countryside, and trade-in replacement, all withdrew. The annual production and sales of automobiles increased by 0.84% ​​and 2.45%, respectively. The year with the lowest increase in more than ten years. At the same time, the rapid expansion of the auto market in the short term has also caused many problems to emerge. The most obvious is the problem of traffic congestion in most of the first- and second-tier cities in the country. And Beijing has also issued a motorized license plate numbering policy to restrict the rapid growth of vehicle ownership.

Past experience tells us that policy-based stimulus is only a measure of equity. It can only quickly release the demand for the auto market in the short term. However, once the stimulus policy is withdrawn, the auto market will have to face the painful period after demand is overdrawn. If the auto market requires policy incentives whenever it encounters a trough, then the auto market is bound to be in a cycle of stimulus callbacks and stimulus and then callbacks. When there are policy incentives, no matter what the car is sold out, it weakens the motivation for R&D and innovation of car companies. When the car market makes a callback, manufacturers will start a price war and wait for the next stimuli in the most “non-technical” way. In the long run, it is not conducive to the stable development of the auto market.

Therefore, when the auto market is in the doldrums, appropriate policy incentives to help the industry emerge from its predicament are necessary. However, this policy stimulus must not be used as a magic weapon to develop the auto market. For the auto market, a stable and healthy competitive environment is an important factor in safeguarding its healthy development.