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Car Manufacturing Expands and Ownership Rises

The Chinese car industry has been expanding. In 2030, production is roughly 50 million vehicles per year, both passenger vehicles and trucks. A growing auto industry also helped other related industries (everything from car repair to advertising and component manufacturing) to prosper.

Most cars produced in China are sold in the domestic market, where many households are still purchasing their first car. The share of exports has risen from 5 to 10 percent (including both light-duty and commercial vehicles). The earliest export markets were in developing countries, where low-priced Chinese vehicles were more attractive than more-expensive American and Japanese models. Since the mid-2020s, when engineering expertise improved and safety problems were resolved, a modest share of exports has gone to the United States, Japan, and Australia.

One place where Chinese manufacturing has become competitive is in hybrids and EVs. The increased adherence to intellectual property protection helped reassure foreign manufacturers operating in China that innovations in these areas were safe to introduce. Some even think that Chinese EVs might take off in the United States, where the market is expanding because of high oil prices; thus far, though, that has not happened.

As incomes have risen, car ownership has also increased to roughly 240 vehicles per 1,000 people, far higher than in 2014 (when it was less than 100 per 1,000 people) but still below ownership levels in developed countries (Japan, for example, had just under 600 personal vehicles per 1,000 people in the 2000s). Much of the increase has taken place in second- and third-tier cities, which could still accommodate them. In the first-tier cities, the number of vehicles has continued to grow, but no longer explosively. The total passenger-vehicle fleet is about 345 million.

Constraints on Driving and Vehicle Ownership Spread Widely

Parking remains problematic: Supply long ago outstripped demand, and cars were being purchased at such a fast rate that cities could not physically keep up. In the late 2010s, several cities adopted Tokyo's "proof-of-parking" requirement that each aspiring car owner prove that he or she has an off-street parking space available before being allowed to purchase a car (Asian Development Bank, 2011). However, the wealthy always seem to manage to find places to keep their multiple vehicles, and parking enforcement is not as effective as it might be.

In response, quite a few second- and third-tier cities saw public campaigns to increase restraints on ownership. City populations pressured their leaders, who were also facing demands for better air quality, to impose various types of restrictions that mirrored the auctions and lotteries for car ownership rights that started in Beijing and Shanghai. The Shanghai model of auctioning license plates has been viewed as more effective at dampening vehicle ownership—indeed, as early as 2011, auto ownership was considerably lower in Shanghai than Beijing despite that city having higher incomes than Beijing (Kishimoto, Paltsev, and Karplus, 2012). Although several cities have tried lotteries modeled on Beijing's, these have been less effective because those with money would prefer to compete at auction. Public opinion about the lotteries remains divided, with those who favor more environmental regulation still supporting restrictions and many in the growing middle class feeling resentful that cars remain financially out of reach.

Cities also adopted constraints on driving as congestion continued to be a major problem. (Rising gas prices did little to discourage driving because, with higher incomes, those who can afford to buy cars can generally afford to drive them.) Experiments with odd-even license plates were unsuccessful, but time-of-day pricing became fairly common. Widespread intercity tolls had accustomed Chinese drivers to paying for the roads, so it was not a major leap for a third-tier city of about 2 million residents to implement in 2022 a time-of-day pricing system modeled on Singapore's Electronic Road Pricing. Every time a driver passes a certain point, the system automatically deducts a fee from a debit card inserted into a transponder in the vehicle. The fee varies with the time of day. Other cities followed. Several cities have even integrated this card with their transit system so that someone can use one account to pay for both transit fares and road charges. The revenues were used to provide more and better transit service.

Although there were discussions of cordon charges, which are charges imposed on drivers entering a central area (as has been done in Singapore and London for decades now), the sprawling nature of most Chinese cities made this impractical because they have few highly concentrated central business districts. Widely watched efforts in two other cities to institute road-use fees based on all kilometers driven were met with protests, and officials backed off.

By the early 2020s, about 40 percent of urban residents lived in areas with some type of restraint on either ownership or driving. That percentage has continued to rise and now stands at 65 percent.

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