, , , , , , ,

As the Scottish poet Robert Burns wrote, “The best laid schemes of mice and Asian teenager holding keys to new carmen/Go often awry.” That is, we might have the best intentions to produce beneficial outcomes, but sometimes those plans have a way of leading to the opposite effect. It’s a truth that consumer behavior researchers and marketers know only too well.

Consider, for example, the case of China and its latest attempt to limit air pollution due to cars. The expansion of China’s middle class has created a vast new population of consumers who can afford cars. The nation’s roads, especially in urban centers such as Shanghai, Guangzhou, Guiyang, and Beijing, have become clogged with vehicles. Pollution levels also have reached critical proportions. And China has moved into the top spot in terms of consumer car purchases, with some estimates suggesting that Chinese consumers will buy 30 million vehicles annually by 2020.

In response to these concerns, Chinese government officials have begun testing a licensing regulation that requires people to enter a lottery for a limited number of car registration tags. Without the license plate, drivers would face severe penalties. Thus, officials hoped to halt the growth in this sector and thereby limit pollution and congestion on the roads.

Instead, consumers have taken the threat that the regulations would spread as a great reason to buy a new car immediately. If they might not be able to next year, they had better snag a car right now! In cities in which the regulations are already in place, the lucky license lottery winners also are buying bigger (i.e., more polluting), more expensive vehicles. As one consumer noted, “Would you want to put a 100,000 yuan plate on a 50,000 yuan car?” Because these consumers already are spending more than they might have planned, just to have the chance to enter the lottery for a license, they feel more justified spending more on the car itself. Average prices paid per car thus have leapt up approximately 88 percent in just two years.

These trends are great news for foreign luxury car makers like Audi and Mercedes-Benz, whose sales in China have jumped. It is not so great for Chinese car makers, which have long provided the lower end, functional vehicles that China’s population previously demanded. It also might not be great news for the environment, which was not at all what authorities planned when they implemented these regulations. The best laid schemes, indeed.

Source: Rose Yu and Colum Murphy, “In China, Air Pollution Rules Spur Big Car Purchases,” The Wall Street Journal, August 7, 2013