Friday, August 9, 2013

To Buy A Car In China: Buy A Lottery Ticket For $13,400


Later, 11:39 CDT: a reader tells me --
Original Post

Some Chinese dots to connect:
Some data points:
  • several Chinese cities are proposing license-plate lotteries as a way to limit the number of cars on the road
  • Shanghai: one of four major Chinese cities that auctions opportunity to buy a car; 10,000 tickets auctioned monthly
  • Lottery tickets cost $13,400 if one wants to buy a second car
  • road density in China: "every kilometer of road in China has about 200 cars, as many as in Los Angeles, which has some of the worse traffic in the US." [The distinction for the worst traffic in the US is held by Atlanta and/or Houston.] Note: the density is not just for the major metropolitan areas in China; it is averaged out for the entire country. One can imagine the density in the big cities.
Two days ago, on August 7, 2013, I posted my musings on electric vehicles. The story about the Chinese luxury automobile in the WSJ linked above supports my conclusions, and was worth the price of a subscription to The Million Dollar Way.

The WSJ article linked above about the luxury car market in China is a must-read.

One thing the article does not mention is the average distance the average Chinese drives in one day. My hunch is these guys are not taking road trips to Tibet. These are well-to-do businessmen driving 20 or 30 miles to work and back each day. And if they are paying $13,400 for a lottery ticket they aren't going to put their license tag on a $20,000 Honda Civic. (For all kinds of reasons, not least of which the Chinese hate the Japanese, but I digress.) A luxury EV makes sense. And the Chinese are used to smaller cars which all EVs are, at least to date.

Think about that. The lottery ticket costs $13,400. The article is not clear on exactly how the lotter works. Here's the one paragraph on the specifics of the lottery:
In Shanghai, one of four major Chinese cities with policies designed to reduce car purchases to ease pollution and traffic congestion, between 9,000 and 10,000 plates are auctioned monthly, fetching an average of 82,000 yuan ($13,400) so far this year.
I interpret that to mean a lottery ticket costs $13,4000, which, if it is like an American lottery ticket, you pay your money whether you win or lose.  But regardless of how it works, rich businessmen are not paying $13,400 for a license tag on a cheap car.

Can you imagine how busy gasoline service stations are in China? My hunch is they don't have four gasoline stations on every corner like they do in Los Angeles. My hunch is these rich businessmen will be thrilled to charge their cars overnight in their high-rise apartment garages and call it a day.

GM is huge in China. GM won't sell many Cadillac ELR's in the US -- at least not at first, but there may be some opportunities in China.

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