China's Nanjing city considers limiting issuance of car plates

BEIJING (Reuters) - China’s eastern Nanjing city is studying whether to restrict the issuance of vehicle license plates to reduce traffic congestion, according to an official report posted Monday, despite concerns it could contradict central government moves to boost car sales.

Cars move in heavy fog in Nanjing, eastern China's Jiangsu Province in this file photo December 26, 2006. REUTERS/China Daily (CHINA)

Car industry consultant John Zeng, managing director of LMC Automotive, said such a policy would hamper Beijing’s efforts to stimulate the sector as the world’s largest auto market struggles with the slowest economy in 25 years.

“We are not expecting local governments to issue any policies against the policy from the central government, so I would be surprised if they launched the policy this year,” he said.

A slowdown in the auto market began last year as economic growth weakened, prompting the government to cut taxes on small-engine cars from October through the end of 2016.

The tax cut appears to be driving a rebound in car sales. Vehicle sales in China increased 8.1 percent year-on-year in the first six months of 2016, outpacing a forecast of 6 percent growth for the whole year, according to the China Association of Automobile Manufacturers.

If Nanjing enacted the policy, it would be the first city to restrict plate issuance since 2014.

Similar plate restrictions enacted in at least seven cities including Beijing, Shanghai and Hangzhou helped shift rapid sales growth from major metropolises into lower-tier cities.

The city is researching a range of policies to reduce traffic including congestion fees and limiting which days certain number plates can drive, according to a report posted on the city government website.

Yale Zhang, managing director at Automotive Foresight consultancy, said plate restrictions could provide a fleeting boost to sales if consumers rushed to buy cars in expectation of restrictions being enacted.

“It can easily double or triple sales” in the short-term, he said.

Reporting by Jake Spring and Beijing newsroom; Editing by Stephen Coates