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Parliament members discuss China’s auto market and policy

Members of China’s National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) put forward a variety of suggestions concerning the auto market during their annual sessions in Beijing. These members come from China’s automotive sector and their proposals highlighted new energy vehicles, auto consumption and government policy. The following is a roundup of their views and proposals. Editor

Officials: Individual consumer subsidies for new energy vehicles in discussion

Zhang Shaochun, Vice Minister of Finance: The specific amount of subsidies for individual customers in their purchase of new energy vehicles “remains in the discussion and research stage.” New energy vehicles include hybrid, hydrogen and electric vehicles. For electric vehicles, it is not enough to only subsidize producers or buyers. The infrastructure should be built first.

Li Yizhong, Minister of Industry and Information Technology (MIIT): The central government is encouraging the commercialization of EVs and fuel cell vehicles. “The subsidies for new energy vehicles may reach tens of thousands of yuan, otherwise it wo’t work.”

Miao Wei, MIIT Vice Minister: So far new energy vehicle subsidies are offered only to public buses in 13 pilot cities in China. Subsidies for individual consumers will start also in pilot cities this year. “Subsidies will come from both central and local coffers but in terms of charging stations and related infrastructure, we need the support of local governments.”

Proposals from auto executives (in alphabetical order of last name)

Chen Hong, President of Shanghai Automobile Industry (Group) Corp.: A national alliance for the research and commercialization of new energy vehicles should be set up in order to integrate efforts of automakers, suppliers, colleges and research institutions, infrastructure construction and resource allocation to avoid duplicate investment.

The government needs to implement new oil quality standard before new emission standard.

The numerous and high tax rates levied on domestic vehicle products have adversely affected auto sales. The vehicle taxation scheme should be adjusted, for instance, instituting a different sales tax for different vehicles in order to promote energy saving small vehicles. Factors other than vehicle displacements should be considered in determining different tax rates.

Guo Zhenfu, President of Zhengzhou-Nissan Automobile: The “Automobiles to Rural Areas” stimulus policy introduced last year should be extended into the 12th Five-Year Plan period (2011-2015) and that the related subsidy cap of ¥5,000 ($735) should be increased. In addition, to help boost automobile sales in rural areas, financial institutions should offer rural residents financing options with lower interest rates and simple application procedures. The restriction of pickup trucks in medium and large cities should be lifted.

Li Jindian, Chairman of SG Automotive Group: The government should make policies to speed up the industrialization of new energy buses and coaches. Vehicle pollution takes up 17 percent of China’s overal pollution. It is important to commercialize new energy buses and coaches, as it will not only save oil and reduce pollution, but also help ease traffic congestion in cities.

To accelerate the industrialization of new energy buses and coaches, government departments and institutions should take a lead in buying and using them. Government procurement will influence consumer behavior and manufacturing.

The current infrastructure building in urban areas needs to be reformed to facilitate the operation of new energy buses and coaches in cities. Subsidies to new energy commercial vehicles in 13 pilot cities including Beijing, Shanghai, Chongqing, Wuhan and Shenzhen should be increased.

The government should work out regulations on the recycle and disposal of used batteries in order to protect the environment.

Li Shufu, Chairman of Geely Holding Group: In preparation for an “automobile society” in China, the government should set clear and forward-looking strategies for the automotive sector so as to avoid twists and turns. Mandatory laws and regulations are needed for vehicle fuel economy.

In urban areas, it is more important to design better traffic system for residents in their daily commuting. But we cannot at the same time restrict sales of automobiles to individual consumers.

The government has initiated an investigation about capacity expansion in the auto industry among automakers since late last year. The problems in China’s auto industry should be solved by the market instead of government’s intervention, and the government should give more rights and freedom to automakers and loosen approval limitation.

Li Weidou, General Manager of FAW Group Import and Export Corp.: Chinese domestic automakers are rendered in a disadvantaged position against JVs in terms of market share and profitability. The government should expand support for independent innovation by granting special funds, slashing taxes, and integrating efforts of enterprises and research institutions in developing nitch technologies and products. More talents familiar with international operations should be hired to enhance independent innovation capabilities of domestic automakers.

According to the Automotive Industry Development Policy, JV automakers are required to build an R&D facility with no less than ¥500 million in investment for new vehicle projects. The government should strictly supervise paid-up investment for such R&D facilities and decline approval for any new vehicle project that fails to comply.

Wang Fengying, President of Great Wall Motor: The government should encourage the creation of a brand image of a “Chinese car,” independently branded high-quality cars. Such support should include offering special certificates to carmakers, giving favorable loans and reduced taxes and encouraging domestic consumers to buy Chinese cars.

Of total sales of 4.6 million passenger cars in 2009, independent brands accounted for only 44 percent. The market share of Chinese cars should target for 70 percent in the domestic market.

Government procurement should give priority to the purchase of Chinese cars. Chinese cars should account for no less than 50 percent in the official procurement expenditure. The government also needs to help publicize Chinese cars at home and abroad.

Small-displacement vehicles are the most effective solution to the goal of energy conservation and environment protection. Existing favorable policies in this field are inadequate. The government should adopt a long-term policy in support of small-displacement vehicles.

Yin Jiaxu, Vice Chairman of Chang’an Automobile Group Corp.: In order to accelerate the commercialization of pure electric vehicles, a national R&D platform should be set up that effectively links the government, industry, academia, research institutions and end users. R&D focus should be on battery, electric drive motor, drive control system and rapid charging technology. The government should set aside special funding to support OEMs in building engineering and technology centers for the R&D and testing of electric vehicles. The government should also provide subsidies for the construction of charging stations as well as for the purchase of electric vehicles. Electric vehicles should be exempt from consumption and sales taxes, enjoy preferential right of way and charged a lower parking rate. Companies that engage in the development of electric vehicles should receive preferential treatment such as reduction or elimination of income tax. Last but not least, government procurement should favor pure electric vehicles.

The biggest hurdle to consolidation among domestic automakers is local government interest. The government should offer preferential policies in support of an industry acquisition. Such policies include the alleviation of buyer burdens in terms of staff allocation, debt allocation/elimination, taxes and fees, social duties, asset allocation and consolidation and financing. After a merger, the debt of the merged company should be reduced or written off. The central government may need to provide capital financing at a discounted interest rate for the merged company to help improve performance.

Taxes and fees levied on motorcycles should be reduced. For example, sales tax for all motorcycles should be eliminated and consumption tax for motorcycles with engine displacement of 250 ml and below should be eliminated. In addition, fees and taxes associated with the registration of a motorcycle should be reduced and motorcycle ban in cities should be lifted as long as the motorcycles sold in cities meet relevant standards.

Zeng Qinghong, Vice President of Guangzhou Automobile Group: Individuals should be allowed to use housing funds for the purchase of automobiles.

The government should adopt more effective measures to encourage the use of micro and small vehicles. The consumption tax on small-displacement vehicles can be eliminated. But taxes on diesel and gasoline fuel should be increased.

It is imperative to promote new energy vehicles in China given the country’s huge population and heavy reliance on oil. All the new vehicles produced after July 1, 2012 should be mild hybrids in order to cut back on fuel consumption and exhaust emission. After that, the government should withdraw subsidies for mild hybrids and release a schedule for mandatory application of moderate hybrid system in new vehicles to be produced.

The government should encourage insurance companies to develop new policies covering automobile recalls.

It is time to suspend the implementation of the Administrative Methods on Automobile Brand Sales and Distribution. The Administrative Methods played an effective role in regulating the automobile market and protecting customer rights in the early stages of its adoption. However it has begun to hamper further market development as country’s auto industry has grown much larger and the market become much more diversified. It is necessary to adopt diversified service models in order to maintain a healthy and stable development of the Chinese auto market.

The government should enforce strict testing of vehicles to ensure that they meet emission standards and substantially increasing subsidies for scraping heavy-polluting vehicles.

Zuo Ya’an, Chairman of Jianghuai Automobile Group: China should create a national development strategy for the automotive industry to be highly coordinate among government departments, automotive enterprises and other related authorities. The strategy should focus on a sustainable development of the industry in the next 10-20 years with a view to the overall economic, social and environmental development. It is crucial that such a strategy should also take in the consideration of international competition, domestic economic safety, and the upstream and downstream industrial chain.

A national regulation on automobile leasing should be drafted in support of the leasing business. There should be a vehicle liability insurance for manufacturers, so that the customers’ rights can be secured through insurance firms. The current impunity clause in vehicle compulsory insurance should be amended. 

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