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China’s automotive policies and regulations in 2012: a roundup

China’s automobile market experienced a slowdown in 2011 mainly due to the tightening of the country’s macro-economic controls and expiration of preferential policies, as sales ended up 2.5 percent to 18.5 million units, representing the lowest growth rate in 13 years.

In 2012, a series of automotive related policies and regulations, some of which have already gone into effect while others are drafts awaiting comments, are expected to positively impact the market environment. Below is a roundup of several of these policies and regulations.Editor 


New official vehicle purchase catalogue

The Ministry of Industry and Information Technology (MIIT) on February 24 released the draft of 2012 Catalogue of Automobiles for Selection as Official Cars for Party and Government Organs (the Catalogue) for public comments open until March 9.

Based on the Catalogue, the displacement of sedans, SUVs and MPVs are capped at 1.8L, 2.5L and 2.4L respectively. In addition, all 412 models listed are exclusively from independent brands.



The draft of Passenger Vehicle Corporate Average Fuel Consumption Calculation, or CAFC, was released on February 17 by MIIT.

The CAFC was released to the public in order to solicit extensive comments from all segments of the society during the solicitation period of February 27-March 2. The CAFC is expected to be implemented as of July 1, 2012.

The CAFC is expected to further strengthen and standardize the supervision of energy-saving automobile products, to implement the corporate average fuel consumption administration and to establish a long-term and effective energy saving mechanism for automobile products.

The CAFC dubbed as the “Chinese CAFÉ,” implements regulations of many important issues like application scope, responsibility requirements and related technology information.


Three Guarantees

The Responsibility Rules for the Repair, Replacement and Return of Automobile Products (Known in the industry as “Sanbao” or the “Three Guarantees”) may finally be put into effect in 2012 after years of debate.

The second draft for solicitation was released on January 16 by the Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), stipulating that a repair guarantee is valid for no less than three years or 60,000 km and overall “Three Guarantees” is valid for no less than two years or 50,000 km.

China released the first draft of Three Guarantees for public comments at the end of 2004.


School Bus Safety Rules

In response to accidents involving improper use of school buses, the School Bus Safety Rules (draft for solicitation) was released by the Legislation Office of the State Council on December 11, 2011.

Meanwhile, MIIT in the same month issued four compulsory national standards on school bus safety, including School Bus Safety Technical Requirement, School Bus Seating System and Fixed Facility Strength, Child School Bus Safety Technical Requirements, and Child School Bus Seating System and Fixed Facility Strength, to seek public comments.

The Rules specifies responsibilities of different departments that oversee the management of school buses, school bus and driver requirements, as well as special privileges school buses will enjoy during operation.

In addition, the four standards, which were formulated based on U.S. federal and State as well as European school bus regulations and China’s own road conditions, stipulated specific requirements on bus structure, appearance and markings as well as passenger capacity.


Guidance on foreign investment

The Catalogue for the Guidance of Industries for Foreign Investment (the Catalogue) was officially implemented on January 30, which was released by the National Development and Reform Commission (NDRC) and Ministry of Commerce, replacing the previous one issued in 2007.

Compared to the two previous versions of the Catalogue, the new one tightens policies on foreign investment on China’s auto industry, especially for whole vehicle manufacturing, which was moved from the “encouraged” section to the “permitted” section. Instead, the encouragement will be given to the production and R&D of key components.


New vehicle recall regulations

The Regulations on the Recall of Defective Automobiles (draft for solicitation) was released by the Legislation Affairs Office of the State Council on February 3 and is expected to go into effect soon.

The Regulations indicates that any manufacturers or dealers should stop production, sales and import of vehicles that are deemed defective, and must initiate a recall.

Meanwhile, the manufacturers or dealers that delay required recalls will have their manufacturing or sales licenses revoked and face fines of up to ¥1 million ($158,700).

In addition, one of the new requirements in the Regulations is that automakers will be responsible for the recall of defective factory installed tires on their vehicles, while tire makers will only be responsible to recall aftermarket tires.


Guidelines for auto distribution

The Ministry of Commerce on December 27, 2011 released the Guidelines to Promote Development of Auto Distribution in the 12th Five-Year Plan Period (the Guidelines).

The Guidelines suggests that by 2015, combined sales revenues of the top 100 distributors should account for more than 30 percent of total industry sales, and 30 regional distributors each with annual sales of over ¥10 billion should be cultivated. Furthermore, three to five large national distributors each with more than ¥100 billion in sales should emerge before 2015.

However, industry experts believe that although more and more large-scale dealership groups have emerged, their total share of the market is still not as high as expected.

Under existing market conditions, it is not easy for a dealership group with annual sales of over ¥100 million to emerge anytime soon.


Standards for compulsory scrap

The Ministry of Commerce at the end of last September released the new draft of Motor Vehicle Compulsory Scrap Standards (the Standards) to solicit comments. The actual standards are expected to be carried out in 2012.

The new Standards detailed the scrap standards on motor vehicles based on fleet and non-fleet vehicles. Fleet vehicles including taxis and medium buses have a scrap term of 8-15 years, while privately-owned vehicles do not have strict terms, except those non-public medium and large buses which have 20 year terms.

The Ministry of Commerce released an earlier version of the draft in 2006.


Laws on vehicle and vessel tax

The Implementation Rules of People’s Republic of China on Vehicle and Vessel Tax (the Implementation Rules) went into effect on January 1 this year, with a validity period of five years.

The Implementation stipulates that the collection standards on passenger vehicles, rather than passenger capacity, will be decided by vehicles’ displacement, which is classified into seven grades with taxes ranging from ¥180 to ¥4,500.

Meanwhile, the Implementation Rules lists the range of vehicles and ships that will be affected by the new rules, including passenger and commercial vehicles, trailers, other vehicles, motorcycles and ships.


“Double duties” on U.S.-made vehicles

The Ministry of Commerce on December 14, 2011 claimed that it will collect the anti-dumping and countervailing duties on the 2.5L and above imported sedans and SUVs made in the U.S. during the period from December 15, 2011 to December 14, 2013.

Based on the notice, several auto makers in the U.S. including General Motors, Chrysler, Mercedes-Benz and Toyota will be hit with duties ranging from 2 to 21.5 percent.

As a result, Chinese consumers will have to bear most of the price increases for these imported vehicles due to the double duties.


Industrial transformation and upgrade

Based on the Industrial Transformation and Upgrading Plan (2011-2015) (the Plan) released by the State Council on December 30, 2011, the production concentration of the top 10 automakers, within five years, should grow to 90 percent from 78.2 percent, and 3-5 companies owning core competitiveness shall emerge through mergers and acquisitions.

In addition, by 2015, the average fuel consumption of energy-saving passenger vehicles should reach 5.9L per 100 km, and the production and sales of new energy vehicles should total 500,000 units.

Besides, the Plan offers other policies on upgrading of traditional vehicles and development of new energy vehicles.


Plan on energy-saving and new energy vehicles development

The Energy-Saving and New Energy Vehicle Industry Development Plan (2011-2020) (the Plan) may be released in 2012, after a 2-year delay. The Plan is currently under review at the State Council.

According to the Plan, the encouragement policies can be summarized to three parts. First, launch the demonstration and promotion pilot points of new energy vehicles. Second, five cities will become pilots for the offering of subsidies to individuals who buy new energy vehicles. Third, customers who buy energy-saving vehicles can receive subsidies.


Guidelines for Air Quality Assessment of Passenger Cars

The Ministry of Environmental Protection and AQSIQ last October released the Guidelines for Interior Air Quality Assessment of Passenger Vehicles (draft for solicitation) (the Guidelines), which went into effect on March 1.

The Guidelines offers intensity standards on gaseous particles inside passenger vehicles such as benzene, toluene, formaldehyde and acetaldehyde, which are often found in new cars.

The previous version was submitted for public comments in 2009.


Four EV charging standards

The Standards Administration of China approved and issued four sections of the Electric Vehicle Charging Interface and Communication Protocol Standards (the Standards) on December 22, with an effective date of March 1.

The four sections include three standards on EV conductive charging systems, regulating general conditions and AC/AD, charging interface, as well as a communication protocol between off-board conductive charger and battery management system,

The Standards will offer technology and standards support for infrastructure construction of electric vehicles, which has significant meaning for new energy vehicles’ completion of standard systems, promotion of pilot demonstration, as well as development of new energy vehicles in China.

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