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Policy mix to guide healthy NEV industry development

The infant Chinese NEV industry has come to its adolescent age. Though still largely driven by policy and benefiting from subsidies, the industry has become strong enough to survive in the post 2020 era when there are no longer subsidies.

The last several years witnessed the wild growth on the number of both NEV players and vehicles. When an industry grows with an abnormally fast speed, just as a fruit is forced to ripen, it grows in size quickly but may taste bitter.

Open report shows that there were 10 cases of NEVs catching on fire in China in the first half of this year. As for charging facilities, those already built ones are not in the same standard or of same quality, which poses hidden threat.

With many players swarming in, some low level enterprises churn out disqualified products or cheat on registered vehicle numbers just for subsidies.  

Such kinds of unlawful practices have pushed for several ministries to conduct investigation early this year.

The move was not the only one to regulate the market or the industry.

The nation had issued 30 policies as of the end of June regarding promotion, industry regulation, management, charging facilities, and enterprise lists. 

One policy matters the most for industry players was issued by the Ministry of Finance in 2015, which regulates NEV subsidy standard in 2017 to 2018 would decrease by 20 percent compared with that of 2016, 40 percent further decrease in 2019 to 2020 and finally ending after 2020.

The subsidy phase out policy has been a heated topic since its release (see FEATURE on p. 1). Maybe talks within the industry and estimations about the post 2020 era will never end until the time arrives.   

But the newly released NEV carbon quota management draft policy by the National Development and Reform Commission (NDRC) responded to the issue: carbon quota transaction will replace subsidies. The Ministry of Industry and Information Technology (MIIT) followed by revising its draft policies on NEV enterprise and product admission, which redrew scope on NEVs, raised the bar in entry requirements and strengthened safety supervision.

These slew of policies signal an end to the wild growth of the NEV industry.

Still there would be local policies to coordinate or specify these guiding ones.

Subsidy policies vary in China’s fragmented market.   

BYD’s NEVs, especially the Qin PHEV, have been hot cakes in Shanghai in recent years. Its sales volume has nearly hit the 40,000 unit cap set by local government. New policy released in April regulates that for NEV manufacturers, when its accumulated PV sales volume in Shanghai exceeds 40,000 units, subsidies will halve for new sales and will end when cumulative sales exceed 60,000 units. It also regulates for a PHEV model which has a tank capacity no bigger than 40L can get an extra ¥14,000 ($2,154) subsidy. The policy change shocked BYD’s NEV sales.

Though BYD management has expressed deep confidence over its NEV sales for the zero-subsidy era, the policy still triggers many doubts. Some say the subsidy cut should be counted on the overall NEV sales of all manufacturers, not on individual company sales. The policy may only protect those less competitive companies.

Talks or debates will continue, so will efforts to push for the healthy growth of the Chinese NEV industry.

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