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In rural China, a bumper crop of new car owners

Beijing is offering incentives to spur vehicle sales in the countryside. Sales are so brisk that dealers often run out of stock.

May 27, 2009|Don Lee

CHUZHOU, CHINA — Like everybody else in his farming village, Zhan Changchun used to get around on a bicycle. This month, the 29-year-old walked into a local dealership, pulled out $7,300 in cash from his leather satchel and drove away with the family's first car: a seven-seat micro-minivan that's jointly produced by China's Wuling and General Motors.

The Zhans drained their life savings and borrowed from relatives, bold moves in a slowing economy.

But they couldn't resist a slew of government incentives: a 50% sales tax reduction, elimination of hundreds of dollars in road maintenance fees, plus the biggest of them all, a 10% rebate for rural residents buying vehicles with engines smaller than 1.3 liters.

It's all part of Beijing's "Send Automobiles to the Countryside" campaign, an effort to speed rural development and boost domestic consumption at a time when foreign demand for China's manufacturing exports is slumping. The government is also giving people in the countryside rebates for buying refrigerators and other appliances.

"Government policy is good these days," said Zhan, a big man with a round belly and cherubic face. He beamed as he showed off his gray van to visitors. The seats were still covered in plastic wrap. Red ribbons were tied around the side mirrors, good-luck symbols for a new vehicle.

"I never thought I could buy a car," he said.

That's a refrain heard in many Chinese villages these days as hundreds of thousands of farmers join the motor age. And it's a big reason China has overtaken the U.S. in car sales this year. While new-vehicle purchases in the U.S. plunged 37% in the first four months of this year, they jumped more than 9% in China, to 3.8 million, with record volumes in March and April.

China's surprisingly strong car sales have given companies like GM, which is tottering at home, a much-needed boost. It's prompted auto companies and makers of consumer goods to focus even more on China, particularly the vast, developing rural regions.

"Just imagine: If every farmer buys one cellphone, that would be 900 million units," said Zhu Xinkai, an agricultural economics specialist at Renmin University of China.

Zhu doesn't see China's rural car culture reaching full bloom for at least another decade. But the global financial crisis appears to be pushing the trend. Among those taking advantage of the car incentives are migrant workers who have returned home after losing factory jobs; they're breaking open piggy banks or borrowing to buy vehicles to launch delivery and other businesses.

In Chuzhou, a city of 4.5 million in Anhui province about 200 miles northwest of Shanghai, the average per capita income is only $1,700. Many farmers get around in three-wheeled motorcycles with a bed in the back for hauling goods. Yet people recently have been snapping up cars so fast that some dealers have run out of stock. About 3.5 million of Chuzhou's population is considered rural.

Wu Gaifeng, sales director at one of two Wuling dealerships here, says he could have doubled his sales of about 400 units so far this year if only he had supply. His showroom had only four vehicles, none of which he was willing to sell because he needed them for display. The vehicles were draped in red banners touting the government incentives.

In farmlands throughout China, the vehicle of choice appears to be micro-minivans such as those made by Wuling and Changan. Sales of these vehicles, called mianbao che because they're shaped like a loaf of bread, rose 60% in April and are up 40% for the first four months of the year.

Starting at about $5,000, these boxy vans, with tiny engines buried under the front seat and small wheels, are to Chinese farmers what pickup trucks have long been to Middle America.

Since buying the lowest-end model of Wuling's minivans, the Sunshine, for $5,270 this month, Zhang Wenming has been putting in 30 to 40 miles a day making calls on customers and loading materials for his home-decorations business.

The stocky 40-year-old, who once worked as a railroad porter in Shanghai, says he wasn't planning to buy a new vehicle. He wanted to wait until he had paid off debts on his house. But the incentives were too good to pass up, he said, and so Zhang borrowed about $4,400 from two cab-driver buddies.

"It's a lot of pressure because of the debt," he said, steering his van along pockmarked roads toward his home. His wife and 12-year-old son have yet to set foot in the van, he said. "We have no money to go anywhere. . . . I have to make money with it."

In his village of Danzi on a recent hot, dusty afternoon, there were three other minivans parked next to one another in the middle of the main road, one of them also with red ribbons on its side mirrors. That vehicle's owner, Lin Qiang, was reclining in the front seat, waiting for anybody wanting a lift.

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