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EV production licenses: a money tree?

Chery New Energy Automobile Technology Co., Ltd. (Chery New Energy) was formally granted with the fourth EV production license recently, after BAIC BJEV, Changjiang Auto and CH-Auto got theirs earlier this year.

New draft regulation released this August on NEV enterprise and product entry has greatly raised threshold on the industry and makes it harder to get a license.

It is said at then only 10 production license plates would be issued. If it is true, only 8 plates are left for scores of applicants. Although NDRC later clarified that there is no such ceiling on the number of license plates to be given, but pressure still mounts.

In the same month, LeEco announced to build its LeSEE super car factory in Huzhou to produce annually 400,000 vehicles. Wanxiang Group was reported to build a 50,000-unit range-extended electric passenger vehicle manufacturing base in Hangzhou. CHJ Automotive broke ground of its smart vehicle manufacturing base in Changzhou.

It seems NEV players are redoubling their efforts to meet tightening requirements and gain production licenses.

One month before the draft regulation, Conch Profiles, a listed company under Conch Group, one of China’s largest building material providers, aborted its purchase of Chery New Energy since the company did not get a NEV production license.

New industry policy also means a growing popularity of the ticket.

The Society of Automotive Engineers of China (SAE-China) released the Technology Roadmap for Energy-Saving and New Energy Vehicles on October 26 at its annual conference in Shanghai.

The newest policy draws a blueprint for the industry in the next 15 years. It sets passenger vehicle fuel consumption of 5L/100 km by 2020, 4L/100 km by 2025 and 3.2L/100 km by 2030. NEV sales would exceed 7 percent of total automobile sales by 2020, 15 percent by 2025 and 40 percent by 2030. It also estimates that China’s annual vehicle output and sales would reach 30 million units by 2020, 35 million by 2025 and 38 million by 2035.

To honor its commitment at the world climate conference last year and cut carbon dioxide emissions per capita in 2030 by 60 to 65 percent over the 2005 level, China must count on NEVs to balance the industry and achieve the goal.

Also learning from California’s Zero-Emissions Vehicle program, NDRC in August released the Measures for New Energy Vehicles Carbon Quota Implementation, hoping to set credit-based system to replace the troubled subsidy scheme.

Automakers must produce NEVs in proportion to the number of gasoline vehicles they sell. If that target is failed, they would be fined or have to buy carbon emissions credits from competitors, or quit the market.

Tesla finally became profitable in Q3, not from car sales, but thanks to carbon trading. As early as in 2013, Tesla reported a loss of $74 million, but carbon trade earned it $130 million, filling the gap.

Some industry analysts believe if China imposes carbon quota system on its auto market, NEV credit would become a kind of precious resource and a NEV enterprise can guarantee its market place by simply selling credits.

Thus, for a NEV production license holder, the license may be a money tree. For those on the waiting list, it means more than a birth permission. 

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