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Luxury cars sold for a song after bubble bursts in 'China's Dubai'

David Gray / Reuters

Two men walk down a deserted street in front of the unopened Ordos Museum on May 11, 2011. In the wake of a coal boom, Ordos was built to house up to 1 million people but only 30,000 live there today.

BEIJING -- With miles of freshly paved roads, little traffic and some seriously avant-garde architecture, the Chinese city of Ordos provides a driving environment most car enthusiasts can only dream of.

Yet rich Chinese who have invested in the resource-rich city are now frantically rushing to sell off their new luxury toys to stem the excessive bleeding that has come with a steep decline in coal prices.

As the boom turns to bust, some luxury car owners are said to be asking for as little as 10 percent of the typical asking price.

Ordos, which sprung up from the deserts of  Inner Mongolia, sits on a massive coal reserve. It supplies about 17 percent of China’s needs.

When coal was discovered there in the early 1990s, farmers cashed in, selling their land at sky-high prices to private coal mining companies.

The boom sent hundreds of thousands of migrant workers flocking to Ordos.

However, the bubble burst in July. Coal prices dropped for 11 straight weeks, leading to rampant lay-offs and little or no profit for local coal companies.

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One report suggested that 300,000 migrant workers who had traveled to Ordos to live and work had since left.

“Now that the economy is bad, many migrants have left,” lamented Li Rui, a cab driver in Ordos. “It’s still busy downtown, but it’s nothing like Beijing.”

'Anxious to sell'
But those gaping numbers are not the ones that Chinese netizens are breathlessly talking about.

Fueled by a recent report in the Economic Observer, the Internet exploded with rumors that some car owners in Ordos were liquidating their assets for as much as 90 percent off the going rate.

On a popular Ordos-based car sales website, one seller listed a 2009 Porsche Cayman for $79,032. Another owner had listed a Hummer for $80,600 with the plea, “anxious to sell.” In Beijing, a similar model Cayman would usually sell for $110,000, the Hummer for $121,000.

Zhou Hai, the manager of an Ordos-based dealership called Haohai Used Car Company, told NBC News that while prices have plummeted, it is not to the extent that people had claimed.

“The Internet is saying that my prices are 90 percent off, but in fact it’s only 50 percent,” he said.

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Zhou noted that he had a used 2010 Range Rover selling for $160,000, compared to the average price of $207,000 in other parts of China.

Cars imported to China typically are taxed extensively, sometimes raising the retail price to as much as three times the usual U.S. price.

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Ordos was supposed to be China’s Dubai, but the city built for 1 million people today has only 30,000 residents.

Investors across China have snatched up real estate – often with no intention to move in or rent out – in remote places like Ordos as a safe place to keep and grow their money.

China’s stock market is too unpredictable, bank interest rates in China are too low and strict government-mandated limitations on how Chinese can invest their money have encouraged many people to put their money into real estate.

'Ghost cities'
This phenomenon has contributed to what many experts believe to be a serious housing bubble and the rise of an increasing number of what have become known in China as “ghost cities.”

Speaking to NBC News earlier this year, Gillem Tulloch, managing director of research firm Forensic Asia described the confluence of these economic events for ghost cities like Ordos as being: “Empty roads, empty buildings, empty neighborhoods, empty cities -- all over China.”

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Meamwhile, a report from Ordos’ municipal government noted that at the end of April only 40 percent of Ordos' 324 residential construction projects were still under way. Of the 49 new projects, only seven were said to still be in progress.

According to Zhang Xiaofei of Ruili Real Estate in Ordos, 20 percent more people each month are trying to sell their homes in the city, and prices are as low as $320 per square meter, compared to the average suburban price of $800 per square meter.

NBC News’ Yanzhou Liu contributed to this report.

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