SHANGHAI -- At the Shanghai auto show in April, most auto company executives expected China's new-vehicle market, which contracted in 2018 for the first time in nearly three decades, to resume growth in the second half of 2019.
But the prospects of a quick rebound are diminishing with Beijing's resolve to enforce stricter emissions rules and a reluctance to cut taxes on vehicle sales.
New light-vehicle sales in China declined in May for the 11th straight month, falling 17 percent to 1.56 million.
The slowing Chinese economy, undermined by U.S. tariffs championed by President Donald Trump, is certainly to blame. But another direct cause of the slump in consumer demand is the increasing number of provinces set to adopt tougher vehicle emissions standards ahead of schedule.
Four major cities -- Beijing, Shanghai, Chongqing and Tianjin -- and about two-thirds of the provinces in China have pledged to embrace State 6 emissions standards, similar to the Euro 6 rules, on July 1, one year before the date set by the Ministry of Environmental Protection.
Consumers in these regions won't be able to obtain license plates for vehicles that fall short of the new standards in July, so they have postponed new-car purchases, leaving dealerships with high inventories of new cars that can only meet the State 5 emission rules.
The prolonged downturn in the market hasn't deterred Beijing's push for more provinces to upgrade to the State 6 rules as part of the Blue Sky Protection Initiative launched last year.
China's current leaders have placed much more emphasis on environmental protection than their predecessors.
Today's economic policymakers, unlike their predecessors, are also reluctant to deploy strong incentives to boost the economy, including the car market.
To be sure, Beijing has embraced some steps to revive new-vehicle sales. This month, it urged major domestic cities to relax limits on license plates for new cars, especially electrified vehicles, and to encourage sales in rural areas.
But the effects of the stimulus the central government advocates are limited because it's up to city and provincial governments to decide whether to implement the measures.
Meanwhile, the central government has decided not to inject a heavy dose of incentives -- such as a deep cut in new-vehicle sales taxes, as recommended by dealers and that proved highly effective before.
The government halved the purchase tax on vehicles with engine sizes of up to 1.6 liters in 2009 during the global financial crisis and revived the cut in 2015 after demand showed signs of stagnating. The market quickly resumed stronger growth both times after the tax slash.
Trump and Chinese President Xi Jinping are scheduled to meet this month in Japan but few experts expect bilateral trade disputes will be settled given the complexities involved between the U.S. and China economies, and Trump's unpredictability.
China's economy, which grew 6.4 percent in the first quarter, down from 6.6 percent in 2018, will remain subdued as the trade war between the world's two largest economies continues.
Beijing is still prodding more provinces to adopt State 6 emissions rules as part of an environmental protection campaign while giving no hint of boosting vehicle sales with more stimulus. Just last week, east China's Anhui province said it would implement the new vehicle emission standards on July 1, ignoring appeals from industry trade groups to wait.
It's nearly impossible for China's new-vehicle market to shift from reverse to drive anytime soon.