There will be more limits on vehicle purchases in China as the government has launched the toughest ever measures to curb congestion and air pollution, JPMorgan argues in its latest China Auto Drivers report.

Further car purchase restriction, if any, may not be limited to tier-2 cities but much broadened to provincial or regional level. So, aside from general negative sentiment, car sales of all ranges and brands would take the blow, the report says.

Earlier this week, the Zhejiang provincial government announced draft provisions for urban traffic management, such as the introduction of license restrictions, limits on car usage and a hike in parking charges.

In 2012, 1.1 million cars were registered in Zhejiang, or 7.7% of total new car registrations in China. If the regulations become effective, Hangzhou and Ningbo, the 2 largest cities in Zhejiang in terms of new car sales, might be the first cities to be affected, and the regulations might reduce total vehicle sales in China by 1.5%, Goldman Sachs estimated.

The JPMorgan report predicts that the announcement would not slow strong passenger vehicle sales, at least for now, because of short-term rush buyers who fear this proposal would be implemented.

According to the China Passenger Car Association, sales growth of passenger vehicles in China maintained its solid momentum at 15% year on year in the first week of June, bringing year-to-date passenger vehicle sales growth to 15%.

Passenger Vehicle inventory take-up days eased slightly in the second half of May to 1.3 months from 1.4 months in the first half, and store traffic at showrooms was up 8% in May from April.

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