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Hop a bus? Civil servants set to lose government cars
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THE auto industry had mixed reactions when China’s central government extended its anti-extravagance, anti-corruption campaign to use of official cars by anyone not high in the bureaucratic pecking order.
Jia Kang, head of the Research Institute for Fiscal Science at the Ministry of Finance, estimated that more than 800,000 vehicles now issued to government officials will be phased out. Only those holding the rank of deputy minister or above will be eligible for a government car. The rest of civil servants will be given a transport allowance for official business.
At first glance, the policy neither helps nor severely hurts China’s auto industry.
Auto orders may be scaled back, especially Chinese domestic brand cars that were “promoted” in the procurement list last year by provincial governments and central administrations heeding President Xi Jinping’s “Buy China” directive. But how big a difference will that really make in purchases that account for merely 2 percent of China’s auto sales?
Probably the biggest difference will be in the “knock-on” effect. What government officials drive has been long regarded as a promotion for private car purchases. That certainly was the case when foreign brands were the pick of government agencies, and their ubiquitous appearance on the streets gave the cars a high profile. When the fulcrum swung to domestic brands, Chinese carmakers viewed it as a shortcut to higher sales in the mid- and high-end of the market — segments where they traditionally took a backseat to foreign cars.
New energy carmakers seemed to be in the catbird seat amid the flux of government policies. Last week, central-level administrations and pilot cities of new energy car trials were ordered to include 30 percent of green cars in their official vehicle procurement in the next three years.
However, with government fleets now headed for a dramatic downsizing, that 30 percent may not cover much ground, said Cui Dongshu, deputy secretary-general of the China Passenger Car Association.
Domestic brand carmakers and green auto manufacturers may not be the only ones feeling the pinch. Dealerships that profit from after-sales services may also be affected, Cui added.
“Government fleets are insensitive to maintenance and repair prices because they are paid for by official reimbursements,” he said. “It’s no secret that maintenance of government cars often involves unnecessary parts.”
Perhaps the only segment in the car industry that might truly benefit from the new reform policies are car-rental companies.
Shanghai-based eHi Car Services said it expects this reform to be a game changer and government-related business may eventually account for 20 percent of the industry’s total revenue.
Its main rival, China Auto Rental, once estimated that renting a car can be 30 percent cheaper than buying and operating a car of one’s own.
That seems an ideal solution for governments seeking to control budgets, adhere to reforms and keep operations running smoothly.
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