China has strived long and hard to become the world’s number one car market. And it achieved it in late 2009, holding that title until today. Only last year, 18 million vehicles were sold in China while some executives, like Ford’s strategy director for the Asia/Pacific region, Will Periam, expect it to reach 32 million units in the next nine years.

And it’s only natural for automakers to make the country their number one priority. Not just mass manufacturers, which already have local factories, but also luxury brands like Bentley and Rolls-Royce that try to outdo each other by unveiling China-only special editions.

However, the Chinese government officials signaled in a conference that took place in Tianjin last weekend that they want to put a stop to this uncontrolled expansion and focus instead on more fuel-efficient vehicles like hybrids and pure-electric models..

“The government must take the leading role in controlling unrealistic growth of the auto industry,” said Jiang Kejun, the director of China’s top economic planning agency, the Energy Research Institute at the National Development and Reform Commission.

The Chinese market has already slowed down in 2011 compared to the record sales of 2010, since the government ended the tax incentives for rural new car buyers. But it is still huge, and the government officials didn’t exactly explain how they plan to slow down production.

One way is by enforcing a limit on new car registrations as they did in Beijing. Last December, the municipal government of the country’s capital and biggest car market imposed strict limits in monthly car registrations, introducing lotteries for the right to buy a new car and reducing sales by a stunning 70%, partly to limit the impossible traffic jams.

If the measure expands throughout China, it will rock the world’s car industry to its core: practically every carmaker, no matter its size and origin, has invested heavily in Chinese plants and is planning for further expansion.

A logical move if you consider that China’s new car market has gone from less than two million units annually in 2000 to 18 million in just a decade. If the trend shifts, they could be in big trouble.

But maybe this is all part of a grander scheme: don’t you find it strange that, despite all those domestic companies, Chinese cars are virtually non-existent in the North American and European markets? That’s because the government has restricted exports severely and won’t lift this prohibition until product quality improves dramatically – something analysts forecast won’t happen before 2015.

So perhaps the Chinese are trying to urge their own carmakers to rapidly improve their products and become truly competitive on a global scale. Then they will unleash them outside the country’s confines, much to other carmakers’ dismay.

Story source: NY Times

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