Beijing’s New Car Quantitative Restrictions: A step in the right direction

In Jan 2011, Beijing’s Municipal authorities announced a restriction on number of license plates to 240,000 for the entire year. This represents close to 80% drop in sales over 2010. The dealer fraternity in Beijing is under threat of going bust. There are dooms day predictions about the entire Chinese Automotive Industry being devastated by this move. In year 2009, China became the largest automotive market in the world surpassing United States where the markets had declined by over 30%. As a response to global slowdown China unleashed a slew of incentives to boost the urban and rural markets. And they did. The trend continued in 2010. Despite recovery, United States still remains a close second biggest market in the world. So the question is whether why did Beijing Municipal authorities took these steps now?

The simple answer is :  Beijing municipal authorities did not really have any choice. A move on easing traffic was only a question of time. At Frost & Sullivan, I am heading a global program called Global Urban Mobility Tracker. In this year long tracker we understand the issues and challenges in Urban Mobility by talking to over 26,000 commuters in 23 cities across the globe. In my analysis, Beijing stands out as a city which has severe challenges in Urban Mobility. 45% of total journeys in Beijing are in private transportation such as cars, 24% of the journeys happen in public transport and rest in walking or cycling. Average commuter in Beijing travels over 55 kms per day which significantly below global average of 71kms per day. However, the travel time per day is marginally higher at 2:29 min (Global average 2:27 min) This indicates that average speed of travel in Beijing is mere 22 km/hr way below global average of 28 km/hr. Interestingly, the only city which had lower average speed of travel lower than Beijing was Jakarta. The quality of journey is also quite poor in Beijing. Frost & Sullivan’s Journey Experience Index (JEI) which is calculated based on average speed, cost of travel, overall experience and comfort is way below average 57 against global average of 61. 64% of the waiting time is accounted by traffic jams, which is one of the highest in the world. This is not surprising considering that there are estimated 4.8 million vehicles on road in Beijing which has increased by 85% from 2005. It is quite obvious that the city infrastructure needs a respite.

The question is whether the restrictions are good enough to solve the traffic woes of Beijing. The answer unfortunately is No. More needs to be done for improving the JEI for Beijing.

The number of journeys in public transport are still limited to 24% and what is even more worrying is the JEI for public transportation (Beijing : 24) is one of the lowest globally. (Global average : 42) Over 80% of the public transport commuters complain that public transport is crowded and slow. Lower proportion journeys in public transport combined with complains that public transportation is crowded indicates that Beijing needs to further bolster the public transport availability by enhancing the network.

Globally there are 2 peaks in average traffic flow; morning peak between 7:30~9:00 and evening peak between 5:30~6:30. For Beijing both morning and evening peaks are quite sharp. One of the low investment options would be to work on reducing the peak traffic during these hours. This can be done by staggering the office hours, offering flexi-time facilities in major corporate and even encouraging video conferencing / remote working in offices. The available infrastructure would be better utilized if the peaks are not so sharp.

Last few years have seen furious growth rates in Chinese automotive market. It has outstripped the growth rate of infrastructure in many cases. Policies such as this would provide a welcome respite in furious growth rates and allow the infrastructure to catch up with number of cars on road. The resultant growth after that would be more sustainable, solid and real.

Automotive market size in China is about 18 million by end of 2010. Loss of three to four hundred thousand units in Beijing is not going to change the fortune of the industry. But the message coming out of this move is very strong. World’s largest automotive market is choosing sustainable, structured but slower growth over indiscriminate, fast paced growth, which we believe is the right way forward. Current volume restrictions is a good beginning, more needs to be done to improve Beijing Journey Experience Index (JEI).

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Vivek Vaidya

I, Vivek Vaidya, pledge to be a catalyst for creating a thought forum for bright, intelligent and thinking people. Around us, there are several things that are not the way they should be. If you know how they should be and want to share it with the world, this is... Read more

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