Car sales in Beijing have crashed overnight after new rules restricting the sale of vehicle to 2.40 lakhs per year were introduced this week to reduce traffic congestion on the roads.

The holiday season on the New Year eve, regarded as the busiest for car dealers in the Capital turned to be a damp squib as most of them mulled plans to either shut down their business in view of drastic fall in sales.

Wang Yang, a salesperson at the Beijing Qingyang FAW (First Automobile Works)-Volkswagen 4S shop in Fengtai District said that in just under two weeks before new rules came out, his dealership sold as many cars as it normally does in a month. But the numbers took a major hit over the weekend, and sales aren't expected to rise anytime soon.

"Our customers decreased by 80 per cent compared with usual times," Wang told state run 'Global Times'.

The new regulations, announced Thursday after a series of citywide debates on how to fight the capital's traffic gridlock, include restricting the licensing of new vehicles to just 240,000 in 2011, increasing parking charges and expanding public transportation.

In 2010, more than seven lakh new cars were sold in Beijing, bringing the city's total number of cars to more than 4.7 million. More than 20,000 cars were sold on Thursday, the day the restrictions were announced as people rushed to buy cars before the new rules came into affect.

From now prospective buyers including foreigners have to take part in bidding during which 2.40 lakh new number plates would be auctioned.

The new rules came under heavy criticism locally and on the same day the Vice Mayor of Beijing city, Huang Wei, has resigned from his post and shunted to work in restive Xinjiang province which has witnessed deadly riots between Muslim Uighurs and Chinese Hans last year.

Despite being touted as the toughest congestion-tackling measure in history, new regulations are a far cry from what the general public sees as the best way to ease traffic, 'Global Times' said quoting several people in its report.