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50:50 JV equity rule relaxation highlights new industry development roadmap

BEIJING – The Ministry of Industry and Information Technology (MIIT), the National Development and Reform Commission (NDRC) and the Ministry of Science and Technology (MOST) jointly released China’s Auto Industry Mid- to Long-Term Development Plan on April 25.

The industry had been looking forward to this document for some time as it essentially acts as the latest edition of the Automotive Industry Development Policy (AIDP), which was first published in 1994 and had a revised edition released in 2004 that has been in place until today. The draft of the Plan began in early 2016 and went through several rounds of discussions and comments solicitation from different industry stakeholders before the final version got the nod from the State Council in early April.

Miao Wei, minister of MIIT, said in a teleconference on April 25 that the core aim of the Plan, which provides development objectives, key tasks and policy measures for the auto industry over the next decade, is to build stronger Chinese brands, cultivate globally competitive automotive companies, achieve major breakthroughs in new energy vehicles and intelligent connected vehicles to lead the transformation and upgrading of the entire industry through the optimization of industrial development environment and promotion of cross industry coordination and innovation. In fact “innovation” and “intelligent” are the most used characters in the document, each appearing 60 times.

The biggest highlight of the Plan is the statement “open up restriction on joint venture ownership ratios in an orderly manner” which indicates the days of foreign automakers are prohibited from having more than 50 percent of equity in vehicle JVs may be numbered.

The following are the “146686” highlights and key quantitative and qualitative objectives and targets set in the Plan:

 

One Overall Goal

Develop China into a global automotive powerhouse in 10 years.

 

Four Basic Principles

Innovation driven, breakthrough in key technologies;

Coordinated development and cooperation for win-win;

Market driven guided by the government;

Open, inclusion with both competition and cooperation encouraged.

 

Six Major Objectives

Major breakthroughs in the development of key technologies 

By 2020: cultivate and form several carmakers that rank among the top 10 new energy vehicle companies in the world, develop intelligent connected vehicles according to global standards;

By 2025: help major Chinese NEV companies expand their global influence and market share, and ensure that relevant companies be able to develop world-leading intelligent connected vehicles.

Build a safe, reliable industrial chain

By 2020: establish several auto parts makers each with annual revenues of over ¥100 billion and develop several key technologies that dominate the global market;

By 2025: establish several top 10 auto parts conglomerates.

Push forward Chinese brand development

By 2020: grow several Chinese auto brands into world-renowned brands and significantly improve safety of commercial vehicles;

By 2025: help several Chinese companies rank among the top 10 carmakers by sales and output by 2025.

Restructure the industry

By 2020: spur the development of smart technology and increase the share of automotive aftermarket and services in the industry value chain to 45 percent;

By 2025: apply smart technologies in key industrial segments while growing the proportion of aftermarket and services to over 55 percent.

Strengthen global expansion

By 2020: export vehicles to developed countries;

By 2025: expand further Chinese brand influence globally. 

Bolster green development

By 2020: average fuel consumption for new passenger vehicles drop to 5L/100 km (4.5L or less/100 km for energy-efficient passenger vehicles). Commercial vehicles should meet China VI emissions standards and NEVs should meet international standards for energy consumption. Vehicle recycling rate should reach 95 percent;

By 2025: average fuel consumption for new passenger vehicles further drop to 4L/100 km, with commercial vehicles and NEVs meeting international standards for emissions and energy consumption, along with actual vehicle recycling rate reaching globally advanced levels.

 

Six Major Tasks

Set up systems for innovation and spur independent development. Improve systems for innovation, focus on breakthroughs for core technologies, and enhance service capabilities.

Strengthen essential abilities and facilitate industrial chains. Solidify parts supply systems and develop advanced automotive materials and manufacturing equipment in order to promote the synergistic and highly efficient development of entire industrial chains.

Make breakthroughs in major areas and propel the upgrading of industrial structures. Accelerate the R&D and industrialization of NEV technologies and step up the promotion and application of NEVs. Ramp up efforts to develop core technologies for connected vehicles, carry out demonstrations of connected vehicles, and push forward the R&D and promotion of energy-saving, eco-friendly auto technologies.

Speed up cross-industry integration and establish a new industrial ecosystem. Advance intelligent manufacturing, expedite the development of the automotive aftermarket and service industry, and drive the green development of the auto industry.

Improve brand quality and develop world-leading enterprises. Efforts will be made to boost companies’ quality control capabilities, foster new brands, stimulate the vitality of companies, and develop industry-leading companies.

Deepen openness and cooperation to improve global expansion. Efforts will be made to push companies to go global and improve their international service systems and operating capabilities. Meanwhile, China will boost the level of international cooperation in the auto industry by pushing JV brands and Chinese brands to seek common development through effective policies. The country will also encourage vehicle JVs to boost their R&D investments, increase their proportion of vehicles developed locally in China, and boost their technology and talent exchange with Chinese automakers. 

 

Eight Key Projects

Build innovation centers

By 2020: complete building manufacturing industry innovation centers in power battery and smart connected vehicles;

By 2025: innovation centers with strong international competitiveness able to effectively serve industry development.

Make breakthroughs in key parts development

By 2020: form several parts and components groups that are globally competitive in key core technologies;

By 2025: form several top 10 parts and components conglomerates in terms of output value scale.

R&D and promotion of NEVs

By 2020: annual NEV output and sales scale to reach 2 million units, power battery single cell specific energy to reach above 300 Wh/kg, striving for 350 Wh/kg, system specific energy to reach 260 Wh/kg, cost lowered to below ¥1/Wh.

By 2025: NEVs to account for more than 20 percent of annual vehicle output and sales and power battery specific energy to reach 350 Wh/kg.

Promotion of intelligent connected vehicles

By 2020: driver assist (DA), Partially Automated Driving (PA), Conditionally Automated Driving (CA) should be equipped on more than half the vehicles, connected driver assistance systems should be equipped on 10 percent of the vehicles to meet demands of smart cities construction;

By 2025: DA, PA and CA should be equipped on 80 percent of the new vehicles produced and sold with PA and CA equipped on 25 percent of the vehicles. Highly automated and fully automated vehicles enter the market.

Improve technologies for advanced energy saving and environmental protection

By 2020: corporate average fuel consumption for passenger vehicles to reach 5L/100 km, more than half of new vehicles should be equipped with start & stop technologies;

By 2025: corporate average fuel consumption for passenger vehicles should be further reduced by 20 percent based on 2020 levels, start & stop technologies are widely adopted on vehicles.

Integration of automotive and other industries

By 2020: smart and intelligent levels greatly elevated;

By 2025: R&D, production and sales at key enterprises become fully intelligent, major products energy consumption reach internationally advanced levels. Automotive service industry as a proportion of the industry value chain should rise by 2 percentage points annually over the next 10 years.

Build quality automotive brands

By 2020: R&D expenditure at key enterprises to account for 4 percent of annual revenues, new vehicle average failure rate reduced by 30 percent over 2015 levels, form several world-famous brands;

By 2020: R&D expenditure at key enterprises to account for 6 percent of annual revenues, new vehicle average failure rate improves to international first-class levels, several Chinese brand carmakers enter global top 10 in vehicle output  and sales.

Overseas expansion

By 2020: Chinese brands begin to be exported in large quantity to developed countries;

By 2025: Chinese brands share in the overseas market increase dramatically, become fully globalized.

 

Six Safeguard Measures

Deepen reform of institutional mechanisms including efforts to improve the administrative system for domestic and foreign investment. Open up restriction on joint venture ownership ratios in an orderly manner;

Ramp up financial and tax support;

Enhance construction of standards system;

Reinforce talent base;

Improve industrial development environment;

Put into good use functions of industrial organizations

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