How should car brands react to 'car purchase restrictions' in Beijing?

The Beijing Government announced “quantity control regulations of small passenger cars”, commonly known as the “car purchase restriction” in late 2010, in order to combat traffic congestion problems in the capital.

Since then, car consumers have needed to go through a monthly lucky draw in order to get a license plate that will allow them to legally purchase and drive a car in the city. The number of cars getting a license plate shrank from 900,000 in late 2010 to 240,000 at the most recent draw. In the Beijing auto market, the total number of car sales in Beijing has dropped over 60 per cent, as a result car brands in Beijing market have slashed their media budgets by more than a quarter, according to CTR ad spend monitoring.

MediaCom's Insight team conducted online research in late June to consider the effect of the restrictions on consumer purchasing decisions. It found the car purchase restrictions had a delaying impact on car purchase decisions, rather than a complete abandonment, Only four per cent of its respondents admitted to cancelling plans to buy a car in Beijing, compared to 44 percent who indicated postponement only,

It also found that there was increased demand for certain types of luxury cars among those that won license plates.

Kyle Xiao, research supervisor of MediaCom's Insight team believed that the effect of the restrictions has been "limited and temporary".

He noted that although the quantity of car licenses has been restricted, car buyers are become more stringent in their decision making, "Car brands cannot just  use a nice TVC and repeat it everyday," he said. "They need a deeper communications strategy to give more details of the advantages of their car models."

The "car purchase restriction" significantly enhances the consumers’ car purchasing cost. The uncertainty it brings pushes consumers to be more cautious to choose a better car, Xiao added. "Car brands should maintain enough brand exposure to keep reminding consumers about our brands and car products," he advised.

Michelle Fu, Head of MediaCom Insight, said: “Car consumption demand is rigid, which will only be restrained for a short time but will not be weakened or eliminated. While the difference is, consumers will be more cautious to choose a better car. So brands need to deliver consistent and convincing exposure and develop in-depth communication to help consumers make the decision. ”