SHANGHAI -- Beijing has reignited optimism among global automakers as it considers ways to boost sales of cars and other consumer goods, just weeks after announcing drastic cuts to subsidies for environmentally friendly vehicles.
These proposals include ending the license plate lottery for first-time automobile buyers and relaxing barriers for owners who want to switch to smaller passenger cars.
If implemented, the stimulus measures could boost the world's largest auto market, which recently suffered its first annual decline since 1990. Continued government support specifically for new-energy vehicles, which include electric cars, is also in the cards.
But traditional automakers may be in for a disappointment as Chinese consumers show increased interest in local startups.
"If I were to buy a new-energy vehicle, I would want people to be able to tell right away," said a 29-year-old Shanghai man visiting the Shanghai Motor Show which opened Tuesday. The finance industry worker, who gave only his family name of Zhao, said battery-powered cars made by traditional automakers look similar to their combustion-engine counterparts.
Instead, Zhao said he would prefer one of the cars developed by NIO, a Chinese startup specializing in electric autonomous vehicles, which he believes would offer a unique driving experience in the new-energy age.
John Li, a 29-year-old man from the southern Chinese province of Hunan, agreed.
"I won't buy new-energy cars from traditional carmakers," said Li, who believes these companies have lost their competitive edge to newcomers. He thinks many Chinese companies, such as Geely Automobile Holdings and BYD, lead the global race in new-energy cars, and said he would choose the plug-in hybrid model of Lynk & Co., developed by a joint venture between Geely and Sweden's Volvo Cars.
Morgan Stanley said Monday that it confirmed the details of the measures being considered by Beijing. These include reducing the sales tax to 5% from 10% for vehicles with engines of 1.6 liters or smaller for rural buyers, as well as offering subsidies to encourage owners to replace combustion-engine autos with new-energy models. Ride-hailing and taxi companies might be required to have 80% of their fleet consist of eco-friendly vehicles by the end of 2020 in certain regions, in line with China's air pollution prevention plan.
These proposals could increase household demand in the densely populated cities of Beijing, Shanghai and Guangzhou, where car ownership remains low compared with developed countries, wrote U.S.-based equity research company Jefferies.
The potential support for new-energy vehicles draws particular interest. The segment accounted for just 4% of China's auto market last year, but sales grew 61.7% compared with a 2.8% decline in the overall market.
Last month, Beijing announced drastic cuts to subsidies for these vehicles, a move foreign automakers hailed in hopes that it would level the playing field with domestic companies.
Chinese automaker shares soared Wednesday on news that Beijing is moving toward a new car stimulus. Share prices of more than a dozen China-listed automakers, including state-owned Great Wall Motor and Dongfeng Motor, rose 10%, the daily limit on Chinese stock exchanges. Hong Kong-listed BYD and Geely saw their shares rise more than 10%.
Starting this year, Beijing will require automakers to dedicate at least 10% of their overall production to eco-friendly vehicles or purchase equivalent credits from other makers, a further incentive for foreign companies with strong green technology to enter the country.
Their growing presence was on display at this year's Shanghai Motor Show, where visitors flocked to see the latest green models from Volkswagen, Mercedes-Benz and Toyota Motor -- though analysts say this may not herald a sea change in the Chinese eco-car market.
Volkswagen Group, in partnership with three local carmakers, aims to produce 11.6 million environmentally friendly vehicles in China by 2028, more than half of the group's total global target of 22 million. It has 14 green models lined up for the Chinese market this year and unveiled several at the show.
"We are fulfilling our promises, not only to comply with the new regulations in China, but also to reduce the auto industry's impact on our society through clean mobility and better production processes," Herbert Diess, the group's chairman, said on Monday ahead of the auto show in Shanghai.
Toyota also announced its first own-brand electric vehicles, the C-HR and Izoa models, at the event.
Though more eco-friendly cars carrying big names will be available in China in the coming years, Nick Lai, head of Asia auto research at JPMorgan, thinks they pose no immediate threat to local makers.
"The international players would not want to compete with Chinese companies on the low-priced range," he said, as the segment is already dominated by strong domestic players like BYD. Targeting the high-end segment means "the volume [of foreign electric cars] won't be big in the short and medium term," he added.
As for the stimulus, Nomura Research said that while it might be smaller than the two previous measures in the past 10 years, a rebound in auto and electric appliance sales should help deliver a more sustainable growth recovery.
China's economy expanded 6.4% in the first quarter, amid the official projection for 2019 of 6% to 6.5%.